Leigh Creek Energy
Annual Report 2016

Plain-text annual report

L E I G H C R E E K E N E R GY A N N U A L R E P O R T 2 0 1 6 LEIGH CREEK ENERGYLimited For personal use only C O N T E N T S The year in review Chairman’s Letter Managing Director’s Report Leigh Creek Energy Project Directors’ Report Auditor’s Independence Corporate Governance Statement Directors’ Declaration Auditor’s Independence Declaration Financial Information Independent Audit Report Shareholder Information Corporate Directory 1 2 4 9 18 26 26 27 28 30 52 55 57 Reliable energy for South Australia Forward looking statements: This report contains forward looking statements which are subject to known and unknown risks, uncertainties and other factors that could cause the actual results, performance or achievements of the Company to vary materially from those expressed or implied in such forward looking statements. Leigh Creek Energy Limited does not make any representation or warranty as to the accuracy or likelihood of fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement. The forward looking statements reflect views held only as at the date of the Report. 2 For personal use onlyT H E Y E A R I N R E V I E W • Successful completion of • Building of the LCK team $10M Placement New key personnel supporting the Placement of 35,374,969 shares to Company objectives investors at an issue price of $0.30 per share • Commencement of drilling Enabling the collection of data • Strategic partnership with for modelling and environmental baseline studies Shanghai Electric Power Generation Group To work towards the generation of reliable gas fired base load power in South Australia • Strategic partnership with APT Pipelines Limited Developing conceptual plans for connection to the east coast gas markets 1 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use onlyC H A I R M A N ’ S L E T T E R Dear Shareholders, I am pleased to be able to report that Leigh Creek Energy Limited (LCK) has reached a number of significant milestones during the year enabling the progression of the Leigh Creek Energy Project (LCEP). We commenced the 2014/15 financial year with the clear direction of producing methane and then subsequently fertiliser from the LCEP. However, over the course of the year, it became apparent that due to changing market conditions in South Australia that electricity generation should become a key component of the LCEP. South Australia has seen a confluence of events that have led to the attractive commercial position of being able to produce cheap reliable professional and experienced team who have and continue to deliver the engineering, environmental, geological, and community work required. This team has been built up over the past year to include a number of key personnel, and has been led by the General Manager Technical Mr Justin Haines. In addition to the expanding operational team, we maintain and continue to strengthen the corporate team. We continue to strengthen the board with members with suitable skill sets and we are very pleased to have both Mr Greg English and Mr Murray Chatfield join as Independent Non-Executive Directors. We will continue to work towards having a board where there is a majority of Independent Non-Executive Directors and expect this to occur during the 2016/17 year. base load power for external customers. The Company has formed a number of important relationships over the past 12 months, and I am extremely pleased to report that in April 2016 the Company signed a Heads of Agreement with Shanghai Electric Power Generation Group, to discuss the formation of a joint venture company to build, own and operate a gas fired power station in South Australia. This relationship is important for the Company and the State as the building, owning and operating of a power station ensures the success of the LCEP and has the ability to provide cheaper, reliable base load power to industries and mines in South Australia. The Company has formed a number of important relationships over the past 12 months We have seen the closure of the Pt Augusta Power Station, the closure of the Leigh Creek Coal mine by Alinta Energy, the increase in non- base load wind power, and talk of decommissioning of coal fired power stations in Victoria. Cumulatively these events have put increased pressure on the ability of large electricity users in South Australia to be able to secure base load power without risk of disruption and at a reasonable price. Operationally, the Company delivered on two key goals to certify the coal and gas resources at Leigh Creek. In January 2016, the Company announced the achievement of a 2C SPE-PRMS ISG gas resource of 2,963.9 PJ at the LCEP reported in accordance with the Society of Petroleum Engineers – Petroleum Resources Management System. This report followed, and utilised the Geological Modelling Report announced in December 2015, which had provided the estimate of the Inferred Coal Resource reported in accordance with the JORC Code 2012. The achievement of a gas resource of this size is significant, particularly in the context of the Eastern Australian Gas Market. This is an exciting and important milestone in the development of the LCEP and underpins our original assumption that the LCEP contains significant quantities of recoverable gas. The independent gas resource certification helps accelerate the LCEP development as it provides added confidence to domestic and international buyers of gas, investors in LCK and future debt providers. Whilst the Company was to initially undertake a drill program in order to certify the resources, we were fortunately able to access key historical data late last year. This discovery was important and allowed the project to progress quickly and efficiently at reduced spend. The operational milestones that we have reached have been possible due to a diligent, 2 For personal use onlyC H A I R M A N ’ S L E T T E R Leigh Creek Energy remains focused on delivering the LCEP and in the short term reaching gas demonstration The Company also announced the signing of a non-binding I would like to thank all of our shareholders for your Heads of Agreement with APT Pipelines Limited, a subsidiary support over the last 12 months and all our employees and of APA Group. Under this Heads of Agreement, the contractors for your commitment to the Company and our Companies have been working together and reviewing the achievements of the last year and look forward to updating connection of the LCEP to the eastern Australian the market of our progress over the next 12 months. gas markets. Sincerely, Mr Justyn Peters Executive Chairman The Company continues to maintain a strong relationship with Archer Exploration regarding the use of the LCEP gas, electricity and waste heat, and with AET Investments on the establishment of an ammonium nitrate plant to produce nitrogen based fertilisers for South Australian farmers who must now import 100% of their requirements. At Leigh Creek, we are working closely with Alinta Energy and the wider Leigh Creek and Copley communities and we have gained considerable support for the project. Leigh Creek Energy remains focused on delivering the LCEP and in the short term reaching gas demonstration. To reach this goal, significant environmental baseline studies are required but are yet to be completed. However, this monitoring is well underway and has been assisted by the Company’s recent capital raise. Despite difficult market conditions, the Company raised $10.77 million through a private placement announced April 2016. This placement, securing our financial position, was another important step forward for the Company. As a company we have some very big milestones to both meet and achieve over the next 12 months. Amongst them being securing binding off take agreements for electricity and gas, the furtherance of our relationships with APT, Shanghai Electric and Archer Exploration, and most importantly the completion of baseline studies, and approvals permitting the pre-commercial gas demonstration at Leigh Creek. 3 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only M A N A G I N G D I R E C T O R ’ S R E P O R T Dear Shareholders, I am extremely pleased to be able to share with you our progress and plans with you at this time of rapid growth as we move quickly towards pre-commercial gas demonstration The LCEP is advancing rapidly towards pre-commercial gas demonstration aimed for the March quarter of 2017. We then aim to head into full field commercial planning, engineering and to move through the commercial approval process. and then commercial gas production aimed for 2019. We Together these factors help support our ambition to create intend to commence with power generation, for our own wealth for shareholders, jobs and royalties for South Australia needs and those of nearby major customers, and then move and also help enable our local communities as well as quickly to gas sales via a new pipeline linking us to the major existing and new businesses. pipeline system and from there to customers across Eastern Australia. We are also, now, investigating opportunities to Year Ended 30 June 2016 produce peaking power so that we can provide electricity to LCK incurred a loss of $5,366,248 for the year ended South Australia at times of high demand when wind energy is 30 June 2016 and LCK will pay no dividend. not despatching at high volumes. The current year loss is due to pre-development spend on Our motto ‘Reliable Energy for South Australia’ is important the LCEP and associated administration and support efforts to us for many reasons. The State is suffering from high and was funded by raising equity from shareholders and also unemployment, high gas prices (recently doubled), high from the full sell down of shares we owned in ourselves. power prices (recently almost tripled) and unreliable power supply. At the same time our expected low power costs and potential opportunities to consume or sequester carbon dioxide (CO2) should reduce our environmental footprint. More widely the East Coast of Australia is expecting gas shortages due to the impact of the new Liquefied Natural Gas (LNG) projects in Queensland which have combined to more than triple gas demand. On the supply side Governments in many states have acted to restrict new gas developments either by not supporting clear legal frameworks or on environmental grounds. The changing gas and electricity markets place LCK in a strong position given our certified recoverable gas resource position of 2,964 PJ (near 3.0 TCF) and our location within a state with strong government support and at Leigh Creek with its substantial existing infrastructure. The comparison with the 2015 year loss of $17.6 million is problematic as that year incorporated a reverse takeover (at June 29) which incurred a non-cash charge of $16.7 million to the profit and loss We ended the current year with $8,659,369 cash at hand. Reliable Energy Needed - Electricity Power prices being offered in South Australia for the period 2017-2019 have near tripled compared to recent years and power outages are now occasionally occurring. Southeast Mainland Electricity Prices (A$/MWh) h W M $ A 160 140 120 100 80 60 40 20 Future prices South Australia NSW Victoria 0 0 1 1 r r a a M M 0 1 g u A 1 1 n a J 1 1 n u J 1 1 v o N 2 1 r p A 2 1 p e S 3 1 b e F 3 1 l u J 3 1 c e D 4 1 y a M 4 1 t c O 5 1 r a M 5 1 g u A 6 1 n a J 6 1 n u J 6 1 v o N 7 1 r p A 7 1 p e S 8 1 b e F 8 1 l u J 8 1 c e D 9 1 y a M 9 1 t c O 0 2 r a M 4 Source: Data from the Australian Energy Regulator. For personal use only M A N A G I N G D I R E C T O R ’ S R E P O R T In South Australia, disruption to normal power supply is now not uncommon South Australia’s dedication to renewable energy (wind This means that when power is not available in South and solar) sees it ranked number 1 in Australia in terms of Australia to meet demand, the State is reliant on the installed capacity as a share of total capacity. The ageing interconnector with Victoria. Unfortunately the interconnector electricity grid across Eastern Australia was designed itself can go down, due to maintenance or bushfire. The originally for generally one way flows of electricity originating interconnect can also fail to provide electricity if Victoria is from base load power stations and heading towards suffering a heatwave itself and thus absorbs local electricity customers. Electricity supply has also altered. Gas fired peaking stations generated, leaving nothing for those sweltering in the heat in Adelaide and surrounding population centres. can fire up or down quickly. Solar energy ramps up into Power demand is obviously dependent on weather the middle of the day, generally at people’s homes when conditions in terms of variable demand. Variable demand electricity is not required, and drops off as night falls. Wind arises from such things as TV’s being turned on in the energy is available only when there is adequate wind. evening and air conditioners being switched on during These factors have put enormous strain on the electricity network, the poles, wires, substations and transformers – which ideally need an overhaul to better cope with variable direction flows. Disruption to normal power supply is now not uncommon. summer. The swing between hot day (red), cold day (blue) and mild day (yellow) power use is dramatic, as shown in the following graph which highlights instantaneous power demand across South Australia in MW for a typical 24 hour period from 4pm in the afternoon through the lows at 4am and back to 4pm in the afternoon. Power demand (South Australia) 3100 2900 2700 2500 2300 2100 1900 1700 1500 1300 ) r u o h t t a W a g e M ( h W M Hot day Cold day Mild day pm am pm 16:04 18:28 20:52 23:16 1:40 4:04 6:28 8:52 11:16 13:40 16:04 24 hour period (pm—pm) Source: Data obtained from the Australian Energy Market Operator 5 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only M A N A G I N G D I R E C T O R ’ S R E P O R T South Australian manufacturing and mining industries require Low Emission Energy reliable power supply at a reasonable price. At this time we are advancing discussions with major power users and expect to develop agreements which will allow both parties to co-ordinate planning ahead of signing electricity supply agreements. Our aim is to have a win: win. Large users get a long term secure supply of electricity at a reasonable price so they As the world moves to reduce CO2 emissions it is beholden on LCK to strive to minimise our own environmental footprint. We are investigating various methods of sequestration (e.g. in ISG cavities or rapid forest establishment) as well as consumption of CO2 in fertiliser manufacture or other products derived from our gas. can make capital allocation decisions. For LCK long term Government Support contracts help support our financing efforts and lock in margins so we can create annuity streams. Reliable Energy Needed - Gas A day does not go by when the wider LCK family does not celebrate its original decision to focus on opportunities within South Australia, both because of the tremendous support we receive in South Australia but also when we see the impacts The Australian regulator is predicting gas shortages of the various forms of lack of government support in gas across the East Coast gas network from late 2018 due to projects elsewhere. the impact of high gas demand from the new export LNG facilities in Queensland. We feel we are very much in partnership whereby we work closely with government, as we follow pre-defined and a Gas prices have doubled in the last few years, from $3:50/GJ prescribed regulatory process. We operate largely within the towards around $7:00/GJ and many predict gas prices to rise Petroleum Act which is clear legislation and provides legal even further. Spot gas prices during the recent cold weather certainty for our project. in Southern Australia exceeded $20:00/GJ. The government departments we deal with, primarily the New gas supplies would in normal circumstance limit Department of State Development, are highly professional, expected shortages and new developments and or gas efficient and pro-active. It is not surprising then, that South exploration would act to secure much needed new gas Australia is repeatedly named as one of the best destinations reserves. However, this general supply response to rising globally for its support of the Petroleum industry as prices and predicted shortfalls has been hindered by confirmed in the annual Fraser Institute Surveys (originated numerous factors: in Canada). • Low oil prices have reduced energy company cash flows Such accolades open doors overseas for LCK and definitely and harmed balance sheets – with the result of cuts to aid our financing efforts both with potential shareholders and with banks (future debt providers). When I share the LCK story with overseas parties the first question is always about ‘What level of legal clarity and government support do we have?’ and I am happy to provide our response. This contrasts strongly with how other Australian states deal with the Gas Industry whereby some Australian States are being named as ‘off-limits for new investment’. exploration budgets. • Environmental agitation has increased in specific jurisdictions, sometimes with government support (particularly, NSW, Victoria and Queensland) and this has increased legal uncertainty that has – halted, reduced or delayed new gas developments. • Victoria introduced a Moratorium for new onshore oil and gas exploration. • Queensland recently introduced tougher environmental legislation making directors prosecutable ahead of Companies being found guilty and even placing shareholders liable for environmental matters. Our marketing efforts have confirmed strong interest in new gas supply and we anticipate this will increase as time unfolds and as we head towards and successfully complete our pre-commercial gas demonstration. The Australian regulator is predicting gas shortages across the East Coast gas network from late 2018 6 For personal use onlyM A N A G I N G D I R E C T O R ’ S R E P O R T The reliability of power and the price of power is a critical issue for all South Australians Community Engagement Following an extensive community engagement program, LCK is well known across a wide area of South Australia. We have the potential to positively impact thousands of people directly and tens of thousands indirectly in regional communities. The reliability of power and the price of power is a critical issue for all South Australians, but even more so in communities suffering major job losses such as Whyalla, Port Augusta and Leigh Creek itself following the closure of the Leigh Creek Coal mine in November 2015. We hope to help enable the survival of existing businesses in these communities as well as enable major investment decisions to be made by companies in our region who may like to expand and promote other opportunities for new industries in the region. LCK is committed to using suppliers from South Australia and in particular from the Upper Spencer Gulf Region wherever possible. It is our hope that this strategy will be proven effective in the coming year during the construction and operation of the pre-commercial demonstration facility. Having effectively provided ongoing information to the community in the previous year about the LCEP, LCK will now move to a more formal, structured community engagement effort as we ensure that we engage with the community more broadly. LCEP Location As you know we operate in and around the Leigh Creek Coal Field. Although the former coal mine has ceased coal production, Alinta Energy staff remain at site dedicated to various tasks including rehabilitation. We therefore interact with Alinta staff and contractors and I wish to take this opportunity to thank Alinta for their support of LCK as our efforts ramp up. will derive significant benefits in terms of cost and time to production. Access to the existing rail line would also allow for the import of supplies and the export of finished goods. Research and Development Our commitment to innovation extends beyond being the first to develop a commercial ISG project in Australia, which in itself benefits from the interaction of existing oil industry technology, plant and equipment when configured appropriately. We also have the opportunity to best utilise by-products and waste products in order to maximise financial returns and minimise our environmental footprint. In particular we aim to consume or sequester much of our CO2. It is early on in our R&D investigations but we note that we should have abundant low cost energy, and waste heat which if utilised appropriately can support low cost sequestration of CO2 both underground and also in nurseries supporting rapid growth trees. Working Smarter In addition to our research and development activities, LCK recognises that it operates in the “new” economy. We deliberately and constantly look for smart ways to apply modern technology where there is a potential to improve our performance. One example of this is the use of virtual reality. As an aide to our investor relations effort we have commissioned a virtual reality video using Convergen of Adelaide. Interested parties will soon be able to experience a visit to the LCEP site via full surround virtual reality. They will be able to experience the following over a period of a few minutes: • Inspect the significant established infrastructure at Leigh Creek; town, airport, railway, sealed roads, optic fibre, fresh water dam and power to site. There is existing infrastructure at the site resulting from the past open cut mining operations. If we can negotiate long term access to this infrastructure with Alinta then LCK • Visit the Leigh Creek Coal Field where coal has been extracted since the 1940’s to see the extent of existing infrastructure and the altered nature of landforms. 7 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use onlyM A N A G I N G D I R E C T O R ’ S R E P O R T Adnyamathanha People Conclusion and Thanks LCK is presently gearing up efforts in support of approvals and the necessary engineering efforts ahead of commencing “pre-commercial gas demonstration” at the LCEP. Around this focus is wide ranging and growing efforts that span such fields as safety, community engagement, environmental science, finance, commercial work, investor relations and many other disciplines. We are also seeking to add more professionals to the team and our board and further integrate ourselves in our community so that our dream of ‘Reliable Energy for South Australia’ can be realised for the betterment of many. I wish to take this opportunity to sincerely thank our staff, contractors, shareholders and the many stakeholders in our wider community that we touch on a daily basis for their support of LCK. The company has experienced rapid growth on all fronts over the last year and is actively managing further growth. Such success and effort can only be successful with the hard work and generosity of spirit of all concerned. Having been at the start of the LCK story it is simply wonderful to witness the progress and momentum now gathering. I look forward to the challenges of the year ahead and to reporting to you all frequently as tangible progress occurs. Sincerely, David Shearwood Managing Director LCK acknowledges and respects the culture and history of the Traditional Owners, being the Adnyamathanha people, of the lands around the region in which we operate. LCK is committed to positive engagement with Adnyamathanha Traditional Land Association (ATLA) and the participation of indigenous people on the LCEP and associated infrastructure. Financing LCK requires capital until we reach the point of generating free cash flow. At present, we are analysing options spanning the spectrum between debt and equity and in this regard I wish to thank EAS Advisors LLC for their planning efforts and strategic advice. The LCEP has many components that are essentially infrastructure in nature: • Gas pipeline • Power generation • High voltage electricity transmission • Oxygen plant These lend themselves to appropriate gearing and indeed could be built and owned by others. We have attracted and enjoy our relationship, at present via, Heads of Agreement with APA Group – Australia’s largest pipeline owner and also Shanghai Electric Power Generation Group (Or Shanghai Electric Corp.) - one of the world’s largest manufacturers of turbines and electricity generation plant and equipment. LCK will need additional equity and the vast bulk of this is intended to come from the proceeds of a farm out of part of the LCEP. This effort has now commenced and anticipated to be final after pre-commercial gas demonstration has occurred. The Year Ahead 2016/17 Much work is already underway and indeed the milestones planned require considerable additional internal effort and external support. Our spend will rise as our key focus is to: • Operationally – safely conduct pre-commercial gas demonstration at the LCEP. • Feasibility – complete commercial scale prefeasibility studies. • Planning – add to full field commercial gas development engineering and approval efforts. • Widen and deepen our relationship with the communities in which we operate. • Widen and deepen our relationship with global capital providers (debt and equity). • Sell off, via farm-out, part of the LCEP where we presently enjoy 100% ownership. 8 For personal use only L E I G H C R E E K E N E R G Y P R O J E C T ISG consumes less surface water and generates less atmospheric pollution compared to surface gasification A New Energy Source for South Australia The LCEP represents a significant new energy source that can support: • reliable power generation in South Australia. • add to gas supply on the East coast of Australia. • feed fertiliser and explosives manufacture (replacing imports) for South Australia for the State’s farmers and mining industry. Our focus has always been power generation first, to meet our own internal needs ahead of gas sales via a new pipeline. In the last six months this focus has been augmented to include power generation for external sales, because: • We believe this is a profitable and less complicated initial stage as we are simply adding additional power generation and working with the players within the high voltage network to connect into, and interact with, the system. • capture, consumption and sequestration of • There is interest from major customers for reliable long quantities of CO2. term base load electricity supply; and The range, size and timing of the LCEP stages requires careful consideration as planning progresses. We expect our present level of certified recoverable gas resources (2C: 2,963.9 PJ) to be a candidate for upgrade in early 2017 once the pre-commercial gas demonstration phase is complete and given that ISG is a replication process effort and differs from conventional oil and gas projects which suffer from reservoir risk. Reservoir risk describes the way petroleum production has a plateau rate and a decline curve. ISG is simply repeated. In addition two themes have eventuated over the last year and have acted to focus our attention, being: • The problems within the electricity industry in South Australia are larger than we first imagined – principally because the closure of coal fuelled base load power stations at Port Augusta have left the western part of the State vulnerable to power disruption and some of the highest electricity prices in the country; and • Perception is catching up with reality in the gas industry whereby gas customers are more open to higher prices and are seeing spot gas prices spiking upwards. • This stage is a low capital cost effort which should produce significant cash flows - this gives greater flexibility to our longer term capital needs. We have recently commissioned ElectraNet to provide advice around high voltage electricity transmission, route options, and advice around connection to the grid and participation within the National Electricity Market (NEM). ElectraNet is the largest owner of electricity transmission assets in South Australia and provides advice to market participants (generators and load – being users of electricity). We have also identified the opportunity to produce peaking power, being power which swings into times of electricity supply shortfalls, generally being when wind power is despatching at low levels at times of high power demand. Peaking power can start up and cease quickly. We have recently commissioned CQ Partners to undertake analysis of historical electricity market data and forecasts so that we can best determine the initial viability of power peaking assets. CQ Partners is a leading advisor to energy participants. L E I G H C R E E K E N E R G Y L I M I T E D A N N U A L R E P O R T 2 0 1 6 9 For personal use only L E I G H C R E E K E N E R G Y P R O J E C T Stages of the LCEP The LCEP comprises many separate major components with most sequential in terms of timing and thus there are commercial, engineering and commissioning issues to be considered as we head towards full field commercial development. We are now conducting ‘trade off analysis’ and commencing feasibility studies across many opportunities. To emphasise the nature of the stepped aspects of the LCEP we outline details as follows: Approvals HoA on sales Pre-commercial gas demonstration Sales agreements Feasibility Financing Approvals FID Capital investment costs and syngas production costs are less than surface gasification Clearly this is a large workload but is reflective of the size of recoverable gas resources in place and the LCEP’s location within a supportive South Australia framework and at Leigh Creek which has significant existing infrastructure. Construction Gas and electricity production Other products - fertiliser Expansion CO2 management Stages of the LCEP The LCEP comprises many separate major components with most sequential in terms of timing and thus there are commercial, engineering and commissioning issues to be considered as we head towards full field commercial development. We are now conducting ‘trade off analysis’ and commencing feasibility studies across many opportunities. To emphasise the nature of the stepped aspects of the LCEP we outline details as follows: Clearly this is a large workload but is reflective of the size of recoverable gas resources in place and the LCEP’s location within a supportive South Australia framework and at Leigh Creek which has significant existing infrastructure. Fertiliser and Explosives A prefeasibility study will be completed in 2016/17 following the pre-commercial demonstration project. One of the likely outcomes is that an attractive pathway in full commercial operation will be the production of ammonium nitrate. The bulk of the world’s fertiliser and explosives, by volume, is based on ammonium nitrate (AN) and these products are 100% imported into South Australia resulted in generally high prices for end users being farmers, mines and quarries. AN is usually produced by purchasing methane (CH4) which is treated to extract hydrogen via a capital and energy intensive process. either manufacture AN ourselves or sell hydrogen over a fence to nearby and captive new AN facilities. Hydrogen is valuable to us and has a number of potential end uses, as follows; • Some can go to power generation – however too much in the gas fuel mix can negatively impact the ‘wobbe index’ – because hydrogen burns faster than most fuels. > Hydrogen when burnt to make electricity produces water as its only waste product. • Hydrogen can be reacted with carbon monoxide (CO) to produce additional methane (CH4) – however this requires additional plant. • Hydrogen can be consumed within AN manufacture for fertiliser and explosives sales. Hydrogen is the smallest of molecules making it difficult and expensive to transport and therefore we are not considering its sale or use outside the area of the LCEP itself. Initial market inquiries indicate a ready market in South Australia for fertiliser and explosives due to their current 100% imported and high cost nature. Initial financial analysis indicates the best way to monetise excess hydrogen production at the LCEP is to sell hydrogen over the fence to a new and nearby AN facility, possibly owned by a third party. The LCEP will produce significant quantities of hydrogen as a by-product of the ISG process and if we choose we can LCK continues to meet with AETI investments regarding opportunities within the fertiliser area. 10 For personal use onlyL E I G H C R E E K E N E R G Y P R O J E C T LCEP Description Geology Appraisal drilling planned for Q4 2015 was deferred because of the uncovering of previously unavailable historic information. The data included geophysical logging, coal quality data and original coal samples from the target seams at the LCEP. The coal samples from the LCEP target coal seams were utilised for coal gasification testing, which showed that the Leigh Creek coal was capable of producing ISG Syngas at the rate of 15.2 GJ/tonne of coal gasified. This information underpinned the PRMS ISG Gas Resources certification work. Assimilation and assessment of drill hole data and testing of coal samples resulted in a coal geological model and resource estimate being developed by GeoConsult Pty Ltd (GeoConsult), resulting in LCK announcing a coal Inferred Resource of 377 Million Tonnes (Mt) at the LCEP reported in accordance with the JORC Code (2012). The estimate is based on: • A minimum seam thickness of 2m. • A maximum stone parting thickness of 1m. • ISG Resources were limited to a minimum overburden thickness of 200m. • Opencut Exploration Targets were limited to a maximum overburden thickness of 200m. • Opencut Exploration Targets were limited to a base of weathering grid model. • A fixed Relative Density of 1.4, was applied for the Resource Estimation. • Points of observation spacing of 4km, (1km past the last point) were used in the estimation where geological correlation supported lateral continuity. • Areas associated with major faulting located on the south western basin edge (defined by seismic) have been excluded from Q and V Seam working section Resources. No faulting exclusions were applied from faults observed in pit mapping as full seam offsets were not observed. Tenement block Working Thickness Section (m) Depth (m) Inherent Ash Volatiles Fixed Density Moisture (ad%) (ad%) (ad%) Carbon (ad%) (RD) Area (ha) Volume Tonnage (m) (Mt) PEL650 – ISG F G1-G2-H1 2.0-16.0 200-366 15.2-17.1 6.2-20.6 23.9-29.5 33.6-47.5 1.4 159 11,300,000 15.8 WS-G Block 1 Av.7.1 Av. 276 Av. 15.8 Av. 10.8 Av. 27.7 Av. 42.9 PEL650 – ISG F G1-G2-H1 2.0-7.1 200-301 17.1-17.8 11.6-12.8 27.8-27.9 41.4-42.2 1.4 24 900,000 1.3 WS-G Block 2 Av. 3.68 Av. 245 Av. 17.7 Av. 12.6 Av. 27.9 Av. 41.6 PEL650 – ISG L1 WS-L1 Block 1 PEL650 – ISG K2 WS-K2 Block 1 2.0-6.3 Av. 3.68 2.0-6.7 Av. 3.3 200-392 Av. 245 200-413 Av. 307 – – – – – – – – 1.4 204 6,140,000 8.5 1.4 301 9,970,000 13.9 PEL650 – ISG Q1-Q2-Q3 2.0-29.9 200-831 20.9-23.0 11.0-11.2 24.9-25.1 40.9-42.3 1.4 1069 170,800,000 239 WS-Q Block 1 Av. 15.97 Av. 477 Av. 22.5 Av. 11.1 Av. 24.9 Av. 41.2 PEL650 – ISG V1-V2-V3-V4 2.0-13.7 201-866 18.4-18.8 15.9-17.4 25.2-25.4 37.0-37.8 1.4 990 52,800,000 74 WS-V Block 1 Av. 5.4 Av. 517 Av. 18.4 Av. 16.0 Av. 25.3 Av. 37.7 PEL650 – ISG W1 WS-W1 Block 1 ISG-Project Total 2.0-5.3 Av. 3.4 292-870 Av. 527 Initial PRMS ISG Gas Resources Certification On 8 January 2016, LCK announced an initial ISG Gas Resource at the LCEP of: • 1C 2,747.7 PJ • 2C 2,963.9 PJ • 3C 3,303.1 PJ This was independently assessed and certified by MHA Petroleum Consultants LLC (MHA) and reported in accordance with the Society of Petroleum Engineers – – – – – 1.4 503 17,200,000 24.1 376.6 Petroleum Resources Management System (PRMS). MHA was provided with the Geological and Modelling Report prepared in December 2015 by GeoConsult which provided the estimate of the Inferred Coal Resource reported in accordance with the JORC Code 2012. Seismic survey LCK acquired 18.3 line kilometres of new 2D seismic data at the LCEP in early 2016. This survey provided valuable data enabling LCK to select a specific site for the ISG pre- commercial gas demonstration facility. L E I G H C R E E K E N E R G Y L I M I T E D A N N U A L R E P O R T 2 0 1 6 11 For personal use only L E I G H C R E E K E N E R G Y P R O J E C T Environment LCK requires approval from various State government agencies before commencing Demonstration and Commercial ISG operations. Of particular relevance is the Department for State Development’s requirements for an Environmental Impact Report under the Petroleum and Geothermal Energy Act, 2000. To develop the Environmental Impact Report, LCK is currently undertaking environmental investigations, in accordance with Environment Protection Authority (EPA) guidelines, to identify existing environmental conditions to understand existing impacts and landform modification from historic mining and related operations in the Leigh Creek Coalfield. A major part of the investigations is development of a preliminary Conceptual Site Model to understand relationships between landforms, groundwater and historic operations and their current and potential environmental impacts. In addition to the Environmental Impact Report, LCK is required to prepare a Statement of Environmental Objectives (SEO), in which we outline the environmental objectives to which our ISG activities will conform, and the criteria upon which the achievement of these objectives will be assessed. All of these criteria will be based upon baseline information being gathered in the environmental investigations. Detailed baseline data collection activities planned or being undertaken at the Leigh Creek site include: • Downhole Contaminant of Potential Concern (CoPC) sampling to determine the presence and levels of naturally occurring CoPCs. • Downhole in situ permeability testing throughout the coal basin sedimentary rocks. • Shallow water monitoring bores to collect information about shallow groundwater. • Pump testing to confirm permeability measurements and any potential connectivity between stratigraphic horizons. • Installation of monitoring wells and water pressure sensors. • Flora and Fauna surveys. • Surface water sampling and monitoring. • Air quality testing and sampling. • Soil gas testing and monitoring. • Fixed real time weather station. LCK is pleased to have partnered with local South Australian environmental consultancies in the development of environmental baseline investigations and approval documentation. Local Native Fauna - Budgerigar Local Native Fauna - Wallabies Environmental surface water sampling offsite 12 Conceptual Hydrogeological section of the Telford Basin For personal use onlyThe Facility will comprise a series of air compressors feeding the below ground gasifier. Syngas will be extracted from the gasifier through a production well, after which the free water will be separated from the gas and measured and sampled. After gas analysis, the gas and free water will enter the thermal oxidiser where all components will be safely destroyed. The Demonstration Phase activities undertaken during the year include engineering design of the surface and belowground equipment. Continuing through 2016 the Engineering Team will be focussed on finalising the process design, mechanical design, HAZOP risk assessment and the specification of piping, valves, instruments and control systems. A risk based approach will be employed throughout the design, fabrication, operation and rehabilitation phases of the Demonstration to effectively control or mitigate potentially adverse outcomes. LCK is continuing to work with the South Australian regulators, when appropriate, to ensure they are kept informed of the project’s progress and have sufficient time and resources to effectively manage the Demonstration process. L E I G H C R E E K E N E R G Y P R O J E C T Drilling Drilling operations commenced at the Leigh Creek Energy Project Demonstration site during June 2016. The drilling program will initially comprise 3 drill holes that will collect a variety of important information at the preferred Demonstration Facility site. The data collected will include: • Baseline environmental samples of rock and water including CoPCs within the rock and groundwater. • Groundwater properties including porosity, permeability and the connectivity between the various coal basin strata and the surrounding rocks. • Rock formation properties including geotechnical information which will be used to assess the stratas stability during gasification and drilling. • Coal and overburden samples for detailed gasification analysis. The primary objectives of the drilling program are to supply environmental baseline, groundwater and rock strength data to inform the approvals and engineering design works. Additionally, coal and rock samples will be used for additional gasification test work. Results of this first stage of drilling are expected to be received through to September 2016. Further drilling to install additional monitoring wells will be defined on completion of these initial wells. Demonstration Facility LCK has commenced the detailed engineering for the gasification Demonstration at the Leigh Creek Energy Project site. The Demonstration Facility is focussed on operating a single small gasifier to be able to collect gas quality, environmental and operational data to inform the Commercial Phase design. The challenge for LCK is to operate the Demonstration Facility in a way that safely, quickly and cost effectively assures the required environmental and operational outcomes. It will be a very small plant, with a limited operational life. Schematic Cross Section of the Telford Basin L E I G H C R E E K E N E R G Y L I M I T E D A N N U A L R E P O R T 2 0 1 6 13 For personal use only L E I G H C R E E K E N E R G Y P R O J E C T In Situ Gasification (ISG) Process Surface Coal Gasification and In Situ Gasification Surface gasification of coal was originally used for making town gas. The first commercial gasification was used in the 1800’s for industrial and residential heating and lighting. In gasification, a thermo-chemical process takes place, rather than burning coal directly, to break down the coal into its basic chemical constituents. In modern gasifiers the coal is typically exposed to air or steam and oxygen under high temperatures and pressures. Under these conditions, molecules in the coal break apart, initiating chemical reactions that produce a syngas, typically a mixture of carbon monoxide, hydrogen and other gaseous compounds. ISG and surface gasification can each be used to produce similar syngas that have identical downstream uses. Gasifying the coal in situ (underground) allows the energy extraction from large coal resources that are not economically or technically recoverable by conventional mining techniques. The hazards related to conventional mining are also reduced. Surface disruption is minimised and handling of solid materials is eliminated i.e. coal and ash handling at the surface is not required. ISG consumes less surface water and generates less atmospheric pollution compared to surface gasification. Capital investment costs and syngas production costs are also less than surface gasification. This description is provided to assist stakeholders to better understand our business Core samples will be used for environmental analysis Leigh Creek site. Typical Knock-out Pots used in ISG Demonstration Facilities (Source: Carbon Energy 2012 Annual Report). 14 For personal use onlyL E I G H C R E E K E N E R G Y P R O J E C T In Situ Gasification (ISG) Process What is In Situ Gasification (ISG)? Whilst ISG technology has been known since the 1800’s, it was first adopted commercially in the Soviet Union during the 1930’s and remains in use there today at the Angren plant in Uzbekistan which feeds a power generation plant. Recent advances in oil and gas technologies (notably directional drilling and computer-based process control) have combined to further enhance ISG to become more commercially attractive. The ISG process occurs in deep (generally greater than 300m) coal seams (in situ). By creating the right process conditions (pressure, temperature, presence of oxygen or air, and sometimes steam) in the coal seam, a series of chemical reactions occur, which results in the gasification of the coal. Under this process the solid coal breaks apart into its component gases to produce a synthetic gas (syngas). ISG syngas is typically comprised of varying amounts of hydrogen (H2), carbon monoxide (CO), and methane (CH4) plus other gaseous compounds. The process is controlled via the injection of air or oxygen into the coal seam. These are introduced to the seam via an injection well that is drilled vertically and then horizontally into the coal seam. The injection well is connected to surface facilities including the air, oxygen and steam supply equipment. The syngas is extracted through production wells drilled in the coal seam to the surface where the gas is cleaned for use in downstream processes or direct sale. To facilitate flow through the injection well, gasification zone and production wells, a “link” needs to be created to enhance the in situ permeability of the coal seam. This is best achieved by directional drilling which creates a tube shaped void along which gases can travel. While the precise method to be utilised at the LCEP will be finalised during the front end engineering design phase of the project development work, based on preliminary work, it is anticipated that the establishment of the channel between the injection well and the production well will be achieved by drilling a horizontal hole. Later, heating of the coal at various locations along the drill hole is likely to utilise the Continuous Retraction Injection Point (CRIP) method. This method has been proven at several ISG trial sites and is widely considered to be the preferred method for efficient production of syngas from underground coal seams. In the CRIP process, the production well is drilled vertically and the injection well is drilled using standard oilfield directional drilling techniques in order to connect the wells as shown in Figure below. Once the channel is established and the coal heated, a gasification cavity is initiated at the end of the oxygen (or air) injection well in the horizontal section of the coal seam. When the coal near the recently created cavity is consumed, the injection point is retracted, and a new gasification cavity initiated. In this manner, precise control over the progress of the gasification is obtained which leads to a more consistent gas composition. Once brought to the surface via the production wells the syngas is first separated and processed and is then available for use either: • as feedstock for power stations • for sale to gas customers (after separation of methane from the syngas • as ammonium nitrate (for the production of fertiliser and explosives, or • for conversion to liquid fuels. Standard petroleum and chemical industry plant and equipment is used within surface facilities. Coal gasification using mined coal has been conducted for over 100 years allowing a vast body of knowledge to be developed around cleaning and separating syngas produced by coal gasification. The method of processing the syngas will depend upon the composition of the gas and the end product that the Company ultimately aims to produce. ISG Process L E I G H C R E E K E N E R G Y L I M I T E D A N N U A L R E P O R T 2 0 1 6 15 For personal use only L E I G H C R E E K E N E R G Y P R O J E C T Brief history of ISG ISG was first proposed in the 1800’s. The most significant development experience has been gained in the former Soviet Union commencing in the 1920’s (although interrupted by the Second World War). Following the discovery of cheap oil and natural gas throughout Russia in the 1970’s and 1980’s, the ISG development operations were generally scaled back as being unnecessary and uneconomic in comparison to the abundant cheap natural gas available at the time. Following the break-up of the former Soviet Union only Kemerovo, in the Kuzbass region of Russia and the Yerostigaz station in Angren, Uzbekistan continued to operate, each producing up to 4 billion cubic metres of syngas per annum. The Kemerovo operation closed in 1996, leaving the Yerostigaz operation, located in Angren in Eastern Uzbekistan which had commenced its operations in 1961 as the only commercially operating ISG operation (www.yerostigaz.com). Syngas produced at Angren is used to produce electricity for the city of Angren. ASX Listed Carbon Energy Limited announced on the 25 July 2016 that it had ‘received formal confirmation from the Queensland Government’s Chief Scientist, Dr Geoff Garrett AO, that Carbon Energy met the key recommendations of the government appointed Independent Scientific Panel (ISP) into underground coal gasification.’ Dr Garrett stated ‘ it is clear that Carbon Energy has contributed to the collective understanding of UCG and the conditions under which the operation is likely to be both safe and successful.’ Former Australian Chief Scientist Professor Robin Batterham has also noted that Carbon Energy had established ‘a world first scientific demonstration of an emerging technology from site selection, underground coal gasification with no deleterious impact and finally rehabilitation to conditions no worst than what existed at the start’. In conclusion, whilst the ISG technology is proven, it is yet to be adopted on a commercial scale in the western economies. This gives LCK a distinct first mover advantage and the ability to monetise that advantage in the coming years. Tenement Schedule Petroleum and Mineral Tenements Tenement Percentage interest Grant date Location Petroleum Exploration Licence 650 Petroleum Exploration Licence Application 582 Petroleum Exploration Licence Application 643 Petroleum Exploration Licence Application 644 Petroleum Exploration Licence Application 647 Petroleum Exploration Licence Application 649 Gas Storage Exploration Licence 662 Mineral Exploration Licence 5596 Mineral Exploration Licence 5597 Coal and Gas Resources 100% 100% 100% 100% 100% 100% 100% 100% 100% 18 November 2014 Leigh Creek Under Application Finniss Springs Under Application Callabonna Under Application Roxby Downs Under Application Leigh Creek Under Application 5 February 2016 17 April 2015 17 April 2015 Oakdale Leigh Creek Leigh Creek Leigh Creek Tenement Location Coal Resource Coal Resource Syngas Resource Syngas Energy Coal and Syngas Category 2016 (Mt) 2016 Classification 2016 (Pj) 2016 Resources 2015 Petroleum Exploration Leigh Creek Inferred 377 Licence 650 1C 2C 3C 2,747.7 2,963.9 3,303.1 – – – Mineral Resource and Syngas Resource Governance and Disclosures Mineral Resources are estimated in accordance with the requirements of the JORC Code, by qualified competent persons who are consultants to Leigh Creek Energy. Syngas Resources are estimated in accordance with the requirements of the Petroleum Resources Management System (PRMS) approved by the Society of Petroleum Engineers, by qualified petroleum reserves and resources evaluators who are consultants to Leigh Creek Energy. The Mineral Resource and Syngas Resource Statements in the 2016 Annual Report are reviewed by qualified consultants described above. For Mineral Resources, this is the qualified competent person, and for the Syngas Resource, the qualified petroleum reserves and resource evaluator. Notes on Coal Resources: For the purposes of ASX Listing Rule 5.23, Leigh Creek Energy confirms that it is not aware of any new information or data that materially affects the information included in the 8 December 2015 Resources Statement and that all material assumptions and technical parameters underpinning the estimates in the Resources Statement continue to apply and have not materially changed. The coal resource reported herein, insofar as they relate to mineralisation, are based on information compiled by Mr Warwick Smyth of GeoConsult Pty Ltd. Mr Smyth is a Member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists, who has more than 25 years’ experience in the field of activity being reported. Mr Smyth has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves”. Mr Smyth consents to the inclusion in the report of coal resource estimates based on his information in the form and context in which it appears. Notes on Gas Resources: For the purposes of ASX Listing Rule 5.43, Leigh Creek Energy confirms that it is not aware of any new information or data that materially affects the information included in the 8 January 2016 Resources Statement and that all material assumptions and technical parameters underpinning the estimates in the Resources Statement continue to apply and have not materially changed. The Gas Resource estimates stated herein are based on, and fairly represent, information and supporting documentation prepared by Timothy Hower of MHA Petroleum Consultants LLC, Denver USA. Mr Hower is a member of the Society of Petroleum Engineers and has consented to the use of the Resource estimates and supporting information contained herein in the form and context in which it appears. 16 For personal use only D I R E C T O R S ’ R E P O R T 17 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use onlyD I R E C T O R S ’ R E P O R T Information on continuing Directors Leigh Creek Energy Limited (‘the Company’ or ‘Leigh Creek Energy’) is a public company incorporated and domiciled in Australia and listed on the Australian Securities Daniel Justyn Peters LLB, BA (Politics/Jurisprudence) GDLP – Executive Chairman Exchange. The Directors present their report on the group which comprises Leigh Creek Energy Limited and its controlled entities (‘Group’) for the year ended 30 June 2016. Directors The names of the Directors in office at any time during or since the end of the year are: Experience & expertise Mr Peters joined Linc Energy soon after its IPO. At the time Linc Energy was the world leader in ISG. In his 6 years at Linc Energy Mr Peters held the positions of General Manager Environment and Government Relations, General Manager Business Development, Executive General Manager Nth Asia and finished as Executive General Manager of Investor Relations. His experience across a broad range of business • Daniel Justyn Peters (appointed 28.11.2014) units within Linc Energy will prove invaluable in developing • David Shearwood (appointed 27.05.2015) the Leigh Creek Energy project. • Gregory English (appointed 22.09.2015) • Murray Chatfield (appointed 30.06.2016) • Peter Williams (appointed 21.05.2004) (retired 15.10.2015) • Christopher Schacht (appointed 24.01.2008) (retired 30.10.2015) Previously Mr Peters was employed at the Queensland EPA as head of investigations and Compliance and then acting Director of Central and Northern Regions. He managed the integration of the environmental regulation of Qld Mining Industry into the EPA. Current & former directorships in the last three years None Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Date of appointment Mr Peters was appointed as Executive Chairman on 27 May 2015. David Shearwood B. Eng (Mining Hons) - University of Sydney (1984), Grad Dip in App Fin (SIA) (2000), Prof Dip HR (AHRI) (2006) – Managing Director Experience & expertise Mr Shearwood has 29 years’ experience as a fund manager, strategist and investment banker at firms including Macquarie Bank, Westpac, QBE Insurance, Atom Funds Management, Du Pont and Rio Tinto. He founded Atom and developed a captive Australian equities research firm in Bangalore, India, to support the business in Australia which concentrated on small company investments. Mr Shearwood has travelled the world investigating mining, energy and infrastructure opportunities. Mr Shearwood was one of the earliest fund managers in Australia to invest in the ISG industry. He has achieved top quartile performance as a fund manager and analyst across various sectors during his career with an emphasis on mining energy and infrastructure. Current & former directorships in the last three years None Date of appointment Mr Shearwood was appointed as Managing Director on 27 May 2015. 18 For personal use only Jordan Mehrtens LLB/LP, BCom(Fin), GDip(Planning) – Company Secretary Jordan is a qualified Lawyer, and has other qualifications in finance and urban and regional planning. Jordan has worked with the Leigh Creek Energy Project since its commencement, providing regulatory, compliance and other analytical advice. Jordan is a member of the Governance Institute of Australia and Australian Mining and Petroleum Law Association and performs the secretarial role in the Company. D I R E C T O R S ’ R E P O R T Information on continuing Directors Gregory D English LLB, B.Eng (Mining) – Non-Executive Director Experience & expertise Mr English is an experienced and qualified mining engineer and lawyer with over 25 years of involvement in the resources industry. As a mining engineer he has worked on underground and open pit coal mines, including working as a mining engineer at the Leigh Creek Coalfield where he lived in the Leigh Creek town. As a lawyer Greg has acted for numerous oil and gas companies and advised on numerous gas marketing, gas transportation and similar transactions. Greg’s experience in the coal industry, and in particular his knowledge of the Leigh Creek Coalfield, and experience and contacts in the oil and gas industry is a significant asset to the Company. Current & former directorships in the last three years Archer Exploration Limited, Core Exploration Limited, West African Gold Limited. Date of appointment Mr English was appointed as a non-executive director on 22 September 2015. Murray Chatfield B Com Ag (Economics and Marketing), MBA, ACT, MAICD – Non-Executive Director Experience & expertise Mr Chatfield has extensive experience within finance with nearly 30 years’ experience within investment banking, hedge funds and corporate finance both in Australia and internationally. He was a senior Economist with the New Zealand government before joining Bankers Trust in London. He then moved into Hedge Funds initially as European Treasurer and then as a Partner and COO in a Relative Value Hedge Fund. He was the COO and Partner in a Australian based fund focussed on Global Macro events. He has been and is still, actively involved as a Director of several companies in the Commodity and Marketing areas. Mr Chatfield’s career covers finance, treasury, accounting, operational efficiency, risk management (business, market, tax and regulatory), legal and regulatory compliance and direct financial market interaction. Current & former directorships in the last three years None Date of appointment Mr Chatfield was appointed as a non-executive director on 30 June 2016. Refer to ‘Directors & Executives Remuneration Note (e) on page 24 for shareholding details for Directors. 19 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use onlyD I R E C T O R S ’ R E P O R T PRINCIPAL ACTIVITIES AFTER REPORTING DATE EVENTS The principal activity of the Group was pursuing the The unlisted options issued on 20 July 2016 related to development of its Leigh Creek Energy Project. capital raising services provided in May 2016 in accordance REVIEW OF OPERATIONS AND OPERATING RESULTS with ASX announcement on 9 May 2016. The cost of these options were expensed in the financial year ending The consolidated operating loss of the financial year to 30 30 June 2016. June 2016 was $5,366,248 (2015: ($17,598,147) primarily as a result of applying reverse acquisition accounting). ENVIRONMENTAL ISSUES Additionally, expenditure incurred on the project capitalised The Company and subsidiaries are required to comply with as Exploration expenditure was $1,739,813 (2015: $710,667). various Commonwealth and State environmental legislation In relation to cash flow, the stock of treasury shares were in relation to its planned exploration activities and future sold in November 2016 providing $3.4m funds and a share development at the Leigh Creek site. capital raising was completed in May 2016 providing a further $9.5m (net of capital raising costs) to provide funding for the pre-commercial phase. No notification of any breach of any environmental regulation has been received in respect of any of the Company’s prior exploration activities during the year. On 25 September 2015, Leigh Creek Energy and Archer Exploration Ltd signed a Heads of Agreement whereby MEETINGS OF DIRECTORS Archer will work with the Company to explore synergies on During the financial year, the number of meetings held at their respective Leigh Creek projects in South Australia. No which a Director was eligible to attend and the number amount has been recorded in the accounts at 30 June 2016. actually attended by each Director were: On 15 December 2015, Leigh Creek Energy and APT Pipelines Ltd signed a non-binding Heads of Agreement which will allow the development of conceptual plans for the interconnection of the Leigh Creek Energy Project with the east coast gas market. No amount has been recorded in the accounts at 30 June 2016. On 6 April 2016, Leigh Creek Energy and Shanghai Electric Power Generation Group signed a Heads of Agreement in relation to a future power generation plant located at Leigh M K Chatfield Creek. No amount has been recorded in the accounts at 30 June 2016. DIVIDENDS P L Williams C Schacht Director Board Meetings Audit Committee Meetings Meetings Meetings Meetings Meetings held attended held attended D J Peters D K Shearwood G D English 11 11 9 1 2 3 11 11 9 1 2 3 3 3 2 - 1 1 3 3 2 - 1 1 The Directors do not recommend the payment of a dividend and no amount has been paid or declared since the end of the previous financial year. LIKELY DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES Approval is currently being sought for the pre-commercial development phase of the project. Successful completion of the pre-commercial phase may likely lead to interest in advance transactions over future gas production. Given the nature of the Company’s business as an energy development entity and the status of its activities during 2016, matters dealt with by the Board dictated no efficiencies or other benefits would be gained by having separate Audit and Risk Committee meetings on all occasions in the period under review. Issues relevant to the integrity of the Company’s financial reporting ordinarily dealt with by an Audit and Risk Committee were dealt with by the full Board when expedient. The Company has standing agenda items at each Board meeting to deal with audit related matters normally carried out by the Audit The Group will require further capital to sustain its activities. and Risk Committee. In appropriate circumstances, the Board sought independent legal and accounting advice on CORPORATE GOVERNANCE pertinent aspects. The Board of Leigh Creek Energy Limited is committed to achieving and demonstrating the highest standards of corporate governance and has adopted practices and policies in accordance with the ASX Corporate Governance Recommendations. The Corporate Governance Statement is 20 noted on page 26. For personal use only D I R E C T O R S ’ R E P O R T PROCEEDINGS The Company is not currently a party to legal proceedings DIRECTORS’ AND EXECUTIVES’ REMUNERATION – AUDITED brought against it or initiated by it at the date of this report. a) Principles used to determine the nature and UNISSUED SHARES UNDER OPTIONS At the date of this report, the unissued ordinary shares of Leigh Creek Energy Limited under unlisted and listed options are as follows: Grant Date Date of Expiry Exercise Number under Price Option 14 October 2015 14 October 2019 $0.212 1,000,000 14 October 2015 14 October 2020 $0.25 1,000,000 amount of remuneration The remuneration policy is designed to align the objectives of the Key Management Personnel with shareholder and business objectives by providing a fixed remuneration package to non-executive Directors and time based remuneration to Executive Directors. The Board of Leigh Creek Energy believes the policy to be appropriate and effective in attracting and retaining the best Directors and Executives to manage and direct the Group, as well as create goal congruence between 1 December 2015 31 July 2020 $1.50 2,000,000 Directors, Executives and shareholders. 1 December 2015 30 November 2020 $0.30 10,250,000 The Company’s policy for determining the nature and 6 June 2016 6 June 2018 $0.50 17,687,463 27 June 2016 31 October 2018 $0.20 1,500,000 27 June 2016 31 October 2018 $0.22 1,500,000 27 June 2016 31 October 2018 $0.24 1,500,000 amounts of emoluments of board members and other Key Management Personnel of the Company is as follows. The Company’s Constitution specifies that the total amount of remuneration of non-executive Directors 27 June 2016 31 October 2018 $0.26 1,500,000 shall be fixed from time to time by a general meeting. 37,937,463 The current maximum aggregate remuneration of non-executive Directors has been set at $500,000 Listed options (17,687,463) were issued in accordance with the prospectus for share capital raising in May 2016. For every 2 ordinary shares acquired, the shareholder would be issued 1 listed option to be exercised by 6 June 2018. Previously issued 750,000 unlisted options expiring on 1 November 2015 at an exercise price of $1.727 each, were not exercised and lapsed on that date. An additional 2,300,000 unlisted options were issued on 20 per annum. Directors may apportion any amount up to this maximum amount amongst the non-executive Directors as they determine. Directors are also entitled to be paid reasonable travelling, accommodation and other expenses incurred in performing their duties as Directors. The remuneration of the Managing Director is determined by the non-executive Directors and approved by the Board as part of the terms and conditions of his employment which are subject to July 2016 which related to capital raising services provided review from time to time. in May 2016 in accordance with ASX announcement on 9 May 2016. The cost of these options were expensed in the financial year ending 30 June 2016. During the year ended 30 June 2016, and to the date of this report no ordinary shares of Leigh Creek Energy Limited were issued on the exercise of options. None of the options on issue entitles the holders to participate, by virtue of the options, in any dividend or share issue of any other corporation. INSURANCE PREMIUMS AND INDEMNITY Since the end of the previous year the Company has paid insurance premiums in respect of Directors’ and Officers’ liability and legal expenses’ insurance contracts. The terms of the policies prohibit disclosure of details of the amount of insurance cover, the nature thereof and the premium paid. The remuneration of other executive officers and employees is determined by the Managing Director subject to the approval of the Board. Non-executive Director remuneration is by way of fees and statutory superannuation contributions. Non- executive Directors do not participate in schemes designed for remuneration of executives but they may receive options or bonus payments subject to shareholder approval and are not provided with retirement benefits other than salary sacrifice and statutory superannuation. The Company’s remuneration structure is based on a number of factors including the particular experience and performance of the individual in meeting key objectives of the Company. The Board is responsible for assessing relevant employment market conditions and The Company has indemnified the Directors and Executives achieving the overall, long term, objective of maximising of the Company for the costs incurred in their capacity as a shareholder benefits through the retention of high director or executive, except where there is a lack of quality personnel. good faith. 21 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only D I R E C T O R S ’ R E P O R T The Company does not presently emphasise payment for As the Company is developing an energy asset which is not results through the provision of cash bonus schemes or other yet in production, in the opinion of the Board, the Company’s incentive payments based on key performance indicators earnings and the consequences of the Company’s of Leigh Creek Energy given the nature of the Company’s performance on shareholder wealth are not related to the business as an exploration entity and the current status of its Company’s remuneration policy. activities. However, the Board may approve the payment of cash bonuses from time to time in order to reward individual executive performance in achieving key objectives as considered appropriate by the Board. The Company also has an Employee Share Option Plan, approved by shareholders, that enables the Board to offer eligible employees options to acquire ordinary fully paid shares in the Company. Under the terms of the Plan, options to acquire ordinary fully paid shares may be offered to the Voting at 2015 AGM Of the total valid available votes lodged, Leigh Creek Energy received 99.91% of “yes” votes on its remuneration report for the 2015 financial year with the motion carried unanimously on a show of hands as an ordinary resolution. The Company did not receive any specific feedback at the AGM on its remuneration practices. Use of remuneration consultants Company’s eligible employees at no cost unless otherwise The Company did not engage remuneration consultants determined by the Board in accordance with the terms during the year. and conditions of the Plan. The objective of the Plan is b) Details of remuneration to align the interests of employees and shareholders by providing employees of the Company with the opportunity to participate in the equity of the Company as an incentive to achieve greater success for the Company and to maximise the long term performance of the Company. Details of the nature and amount of each element of the remuneration of each Key Management Personnel (KMP) of the Group are shown in the table below: Short term benefits Post employment benefits Termination benefits Share based payments Other Super Contributions Termination payments 2 Options 1 Total Directors Year D J Peters D K Shearwood G D English 3 M Chatfield 4 C Schacht 5 P L Williams 6 C Ryan 7 J Linley 8 Executives P J Staveley 9 J Haines G Marsden S Appleyard 10 Total 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 22 Directors Fees - 15,000 - - 38,750 - - - 13,222 30,833 11,667 49,166 - 13,687 - 27,500 - - - - - - - - Salary and Wages 325,000 25,000 297,917 22,916 - - - - - - - - - - - 55,000 259,583 - 206,250 - 250,000 - - 30,667 - - - - - - - - - - - 66,641 - - - - - 79,407 - - - 19,636 33,124 - 30,875 3,800 28,302 2,177 3,681 - - - 1,256 2,929 1,108 4,670 - - - 7,838 24,660 - 19,594 - 23,750 - - 24,996 63,639 136,186 1,338,750 133,583 33,124 165,684 133,226 46,410 - - - - - - - - - - - - - - - 3,997 - - - - - - - 18,598 - 22,595 8,038 - 8,038 - 163,671 11 163,671 11 - 148,877 11 148,877 11 - - - 159,288 13,874 - - - - 43,214 - 43,214 - 43,214 - - - 363,913 43,800 334,257 25,093 206,102 - 148,877 - 14,478 33,762 172,063 134,351 - 13,687 - 94,335 327,458 79,407 269,058 - 316,964 19,636 33,124 74,261 617,554 13,874 2,186,293 518,332 For personal use only D I R E C T O R S ’ R E P O R T Notes 1 In accordance with the Accounting Standards, remuneration includes a proportion of the notional value of the options granted during the year. The notional value of options is determined as at the issue date and is progressively allocated over the vesting period. The amount included as remuneration is not indicative of the benefit (if any) that the employee may ultimately realise should the option vest. The notional value of the options as at the issue date has been determined in accordance with the accounting policy Note 15. 2 The Termination payments aggregate amount of $22,595 represents accumulated leave entitlements payable on resignation of salaried employees. No other benefits were paid. 3 Mr English was appointed as a Non-Executive Director on 22 September 2015. 4 Mr Chatfield was appointed as a Non-Executive Director on 30 June 2016. 5 Mr Schacht was a Non-Executive Director prior to his resignation on 30 October 2015. 6 Mr Williams was Deputy Chairman prior to his resignation on 15 October 2015. 7 Mr Ryan was a Non-Executive Director prior to his not being reappointed at the 2014 AGM on 20 November 2014. 8 Mr Linley was Managing Director prior to his resignation on 28 May 2015. 9 Mr Staveley was appointed as Chief Executive Officer on 10 February 2016. 10 Mr Appleyard was Company Secretary prior to his resignation on 30 September 2015. 11 Options to be issued to Non-Executive Directors were agreed at the 30 June 2016 board meeting. As the remuneration is approved at the AGM, these are yet to be approved. Under accounting rules, the options need to be expensed in the financial year using 30 June 2016 as the provisional grant date. An adjustment to accounting expense is required when/if they are approved at the AGM. c) Contracts of Service The employment conditions, tenure and emoluments of the Managing Director and executives are evidenced in writing. Name Position Duration of contract D J Peters Executive Chairman D K Shearwood Managing Director 3 yrs + 1 yr company option 1 3 yrs + 1 yr company option 2 P J Staveley J Haines G Marsden Notes CEO GM Technical GM Commercial 1 Commenced 26 November 2014. 2 Commenced 27 May 2015. d) Share-based remuneration Ongoing Ongoing Ongoing Period of termination notice Termination payment 3 month 3 month 3 month 3 month 3 month None None None None None Unlisted options are granted to Directors and Key Management Personnel as part of their remuneration. The options are not granted based on performance criteria, but are issued to the relevant Directors and Key Management Personnel of the Group to increase goal congruence between executives, directors and shareholders. All options refer to options over ordinary shares of the Company, which are exercisable on a one-for-one basis under the terms of the agreements. Options granted during this financial year: Number Granted Grant date Number vested exercise date Last exercised Vesting and first Name D J Peters 1,000,000 1 December 2015 D K Shearwood 1,000,000 1 December 2015 P J Staveley J Haines G Marsden P L Williams G D English 2 M Chatfield 2 Total 2,000,000 1 December 2015 2,000,000 1 December 2015 2,000,000 1 December 2015 2,000,000 15 October 2015 - - 10,000,000 - - - - - - - - - - 31 July 2016 1 31 July 2016 1 31 July 2020 31 July 2020 31 July 2016 1 30 November 2020 31 July 2016 1 30 November 2020 31 July 2016 1 30 November 2020 15 October 2015 14 October 2020 - - - - Notes 1 Vesting date over four (4) tranches depending on key milestones being achieved. 2 Options to be issued to Non-Executive Directors were agreed at the 30 June 2016 board meeting. As the remuneration is approved at the AGM, these are yet to be approved. Under accounting rules, the options need to be expensed in the financial year using 30 June 2016 as the provisional grant date. An adjustment to accounting expense is required when/if they are approved at the AGM. 23 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only D I R E C T O R S ’ R E P O R T The options were provided at no cost to the recipients. All options expire on the earlier of the expiry date or termination of the individual‘s employment (excepting retiring directors). These options issued in previous financial years, lapsed or were forfeited during the current financial year: Name P L Williams Number of options forfeited Financial year in which those (lapsed) during the year options were granted 750,000 2011 e) Other information Number of Options held by Key Management Personnel The number of options to acquire ordinary shares in the Company held during the 2016 reporting period by each of the Group’s Key Management Personnel, including their related parties, is set out below: Directors D J Peters D K Shearwood G D English 2 M Chatfield 2 P J Staveley J Haines G Marsden Balance at start of year - - - - - - - Granted as remuneration 1,000,000 1,000,000 - - 2,000,000 2,000,000 2,000,000 P L Williams 750,000 2,000,000 - - - 25,000 1 - - - - Total Notes 750,000 10,000,000 25,000 Other Exercised Lapsed Vested & exercisable at the end of reporting period Vested & unexercisable at the end of reporting period Closing balance 1,000,000 1,000,000 - 25,000 2,000,000 2,000,000 2,000,000 - - - - - - - - - - 25,000 - - - (750,000) 2,000,000 2,000,000 (750,000) 10,025,000 2,025,000 - - - - - - - - - - - - - - - - - - 1 Mr Chatfield acquired 25,000 listed options as he participated in the share placement in May 2016. In accordance with the prospectus for the share placement, each shareholder received 1 option for each 2 shares acquired. 2 Options as part of the remuneration package for the Non-Executive Directors have been approved by the board but need to be approved by shareholders at the AGM. Number of Shares Held by Key Management Personnel The number of ordinary shares in the Company during the 2016 reporting period held by each of the Group’s Key Management Personnel, including their related parties, is set out below: Balance at start of year Granted as remuneration Received on excersise Other changes 1 Held at the end of the reporting period - 186,772 - - - - - 186,772 - - - - - - - - - - - - - - - - - 52,000 - 1,308,914 550,000 - 250,000 2,160,914 - 238,772 - 1,308,914 550,000 - 250,000 2,347,686 Name D J Peters D K Shearwood G D English M Chatfield P J Staveley J Haines G Marsden Total Notes 1 Other changes include purchases during the financial year, new KMP on note disclosure. 24 For personal use only D I R E C T O R S ’ R E P O R T In addition to the 238,772 ordinary shares held by Mr Shearwood, Mr Shearwood has a relevant interest in the 104,767,190 ordinary shares in Leigh Creek Energy Limited held by Allied Resource Partners Pty Ltd due to Mr Shearwood owning 20.9% of the issued capital of Allied Resource Partners Pty Ltd. At the date of this report there is no known change in the number of shares held by the Key Management Personnel. Related party transactions An amount of $11,667 is receivable from Allied Resources Partners, in which Executive Chairman Mr Peters and Managing Director Mr Shearwood have an interest. This is not subject to any terms, conditions or fixed payment dates. END OF AUDITED REMUNERATION REPORT 25 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only A U D I T O R ’ S I N D E P E N D E N C E D E C L A R AT I O N A U D I T O R ’ S I N D E P E N D E N C E Grant Thornton Audit Pty Ltd continues in office in accordance with Section 327 of the Corporation Act. The auditor has not been engaged during the year for any non-audit services which may have impaired the auditor’s independence. The auditor’s independence declaration for the year ended 30 June 2016 has been received and is included in this report. Signed in accordance with a resolution of the Board. D J Peters Director D K Shearwood Director Dated at Adelaide, South Australia this 15th day of August 2016 C O R P O R AT E G O V E R N A N C E S TAT E M E N T The Board of Directors (the Board) of Leigh Creek Although the ASX Corporate Governance Council’s Energy Limited (the Company) is committed to achieving Recommendations are not mandatory, under listing rule and demonstrating the highest standard of Corporate 4.10.3 companies are required to provide a statement Governance. The Board guides the affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable. The Board has responsibility for the overall disclosing the extent to which they have followed the recommendations in the reporting period, identifying any principles which have not been followed with reasons for not having done so. Corporate Governance of the Company including its strategic The Group’s corporate governance statement for the direction, establishment of goals for its management and year ended 30 June 2016 is accurate and up to date as at monitoring the achievement of those goals. 30 June 2016, and was approved by the Board on The individual Directors recognise that their primary 15 August 2016. responsibility is to the owners of the Company, its The statement of revised principles and the Company’s shareholders, while simultaneously having regard for the compliance with each principle are set out in the Company’s interests of all stakeholders and the broader community. website www.lcke.com.au The statement outlines the Company’s Corporate Governance Practices in place during the financial year. The Company’s statement is made based on the ASX Corporate Governance Councils Corporate Governance Principles and Recommendations (3rd Edition). 26 For personal use onlyD I R E C T O R S ’ D E C L A R AT I O N The Directors of the company declare that: 1) The financial statements and notes set out on pages 30 to 51 are in accordance with the Corporations Act 2001, including: a) complying with Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; b) giving a true and fair view of the financial position as at 30 June 2016 and of the performance of the Group for the year ended on that date. 2) The financial statements and notes set out on pages 30 to 51 comply with international financial reporting standards as disclosed in note 1. 3) The Managing Director and Chief Finance Officer have each declared that: a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; b) the financial statements and notes for the financial year comply with Australian Accounting Standards; and c) the financial statements and notes for the financial year give a true and fair view. 4) In the Directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. D J Peters Director D K Shearwood Director Dated at Adelaide, South Australia this 15th day of August 2016 27 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use onlyA U D I T O R ’ S I N D E P E N D E N C E D E C L A R AT I O N      Level 1, 67 Greenhill Rd Wayville SA 5034 Correspondence to: GPO Box 1270 Adelaide SA 5001 T 61 8 8372 6666 F 61 8 8372 6677 E info.sa@au.gt.com W www.grantthornton.com.au            AUDITOR’S INDEPENDENCE DECLARATION TO THE DIRECTORS OF LEIGH CREEK ENERGY LIMITED    In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Leigh Creek Energy Limited for the year ended 30 June 2016, I declare that, to the best of my knowledge and belief, there have been:   no contraventions of the auditor independence requirements of the Corporations Act 2001   in relation to the audit; and   no contraventions of any applicable code of professional conduct in relation to the audit.  a b      GRANT THORNTON AUDIT PTY LTD Chartered Accountants  I S Kemp Partner – Audit & Assurance          Adelaide, 15 August 2016     Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.          Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.   28 24 For personal use only F I N A N C I A L I N F O R M AT I O N 24 29 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use onlyL E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 30 June 2016 Revenue Gain on disposal of shares Depreciation Employee benefits expense Occupancy expense Consulting and legal expenses Travel expense Other expenses Interest paid Transaction costs Loss before income tax Income tax benefit Loss for the year after income tax Total other comprehensive income Total comprehensive (loss) for the year Earnings per share Basic (cents per share) Diluted (cents per share) Consolidated Group 2016 $ 39,213 - (35,664) (3,128,846) (227,069) (192,088) (355,958) (1,463,461) (2,375) 2015 $ 2,319 78,384 (35,547) (480,821) (66,394) (160,014) (119,223) (85,175) (5,632) - (16,726,044) (5,366,248) (17,598,147) - - (5,366,248) (17,598,147) - - (5,366,248) (17,598,147) (0.02) (0.02) (0.13) (0.13) Note 2a 6 2b 2c 3 20 20 The accompanying notes form part of these financial statements 30 For personal use only Consolidated Statement of Financial Position as at 30 June 2016 L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 Current assets Cash and cash equivalents Trade and other receivables Other financial assets Total current assets Non-current assets Property, plant and equipment Exploration and evaluation expenditure Total non-current assets Total assets Current liabilities Trade and other payables Short term loans Employee entitlements Total current liabilities Net assets Equity Issued capital Reserves Retained losses Total equity Note 4 5 6 7 8 9 10 11 12 Consolidated Group 2016 $ 2015 $ 8,659,369 1,484,627 338,464 16,031 101,618 18,680 9,013,864 1,604,925 112,940 2,450,480 2,563,420 78,570 710,667 789,237 11,577,284 2,394,162 665,711 - 124,519 790,230 358,270 125,438 20,803 504,511 10,787,054 1,889,651 32,361,720 19,493,353 1,395,284 - (22,969,950) (17,603,702) 10,787,054 1,889,651 The accompanying notes form part of these financial statements 31 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only Statement of Changes in Equity for the financial year ended 30 June 2016 L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 Share Capital $ Retained Share Option Losses Reserve $ $ Consolidated Balance 1 July 2015 Total comprehensive income Total profit or (loss) Other comprehensive income Total comprehensive income Transactions with members in their capacity as owners: Subscribed equity net of capital raising costs Treasury shares sold Options issued Total transactions with owners 19,493,353 (17,603,702) - - - (5,366,248) - (5,366,248) 9,442,046 3,426,321 - 12,868,367 - - - - Total $ 1,889,651 (5,366,248) - (5,366,248) 9,442,046 3,426,321 - - - - - - 1,395,284 1,395,284 1,395,284 14,263,651 Balance 30 June 2016 32,361,720 (22,969,950) 1,395,284 10,787,054 Consolidated BALANCE 1 July 2014 Total comprehensive income Total profit or (loss) Other comprehensive income Total comprehensive income 3,841 (5,555) - - - (17,598,147) - (17,598,147) Transactions with members in their capacity as owners: Subscribed equity net of capital raising costs 1,605,400 Leigh Creek Energy minority shareholders at fair value 29 June 2015 Total transactions with owners 17,884,112 19,489,512 - - - Balance 30 June 2015 19,493,353 (17,603,702) - - - - - - - - (1,714) (17,598,147) - (17,598,147) 1,605,400 17,884,112 19,489,512 1,889,651 The accompanying notes form part of these financial statements 32 For personal use only Statement of Cash Flows for the financial year ended 30 June 2016 L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 Note Consolidated Group 2016 $ 2015 $ Cash flows from operating activities Interest and sundry income received Interest paid Payments to suppliers and employees 14,760 (2,375) (4,015,913) Net cash (used in) / provided by operating activities 16(b) (4,003,528) Cash flows from investing activities Proceeds on disposal of shares Purchase of shares Purchase of property, plant & equipment Proceeds from disposal of assets Capitalised exploration costs Net cash (used in) investing activities Cash flow from financing activities Issue of shares Share issue transaction costs Advances/(Repayments) from related parties Advances from subsidiary prior to completion Net cash provided by financing activities Accounting subsidiary cash acquired upon completion of reverse takeover Net increase in cash held Cash at the beginning of the year Cash at the end of the year 2,319 - (907,410) (905,091) 205,940 (685,002) - - - - (53,745) 2,250 (1,755,702) (710,667) (1,807,197) (1,189,729) 14,027,813 1,777,600 (916,907) (125,438) - (172,200) 125,438 374,045 12,985,468 2,104,883 - 1,474,558 7,174,742 1,484,627 8,659,369 1,484,621 6 1,484,627 16(a) The accompanying notes form part of these financial statements 33 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only N O T E S L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES d) Changes in accounting policy Recently issued accounting standards to be applied in The principal activity of the Group was pursuing the future accounting periods development of its Leigh Creek Energy Project. The accounting standards that have not been early a) General information and statement of compliance adopted for the year ended 30 June 2016, but will be The consolidated general purpose financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards, including Australian Accounting interpretations, other authoritative pronouncements of the Australian Accounting Standards applicable to the Group in future reporting periods are detailed below. Apart from these standards, we have considered other accounting standards that will be applicable in future reporting periods, however they have been considered insignificant to the Group. Board (AASB). Compliance with Australian Accounting i) AASB 2014-4 Amendments to Australian Accounting Standards ensures that the consolidated financial Standards – Clarification of Acceptable Methods of statements and notes of Leigh Creek Energy Limited and Depreciation and Amortisation. its controlled entities comply with International Financial Reporting Standards (IFRS). Leigh Creek Energy is a for- profit entities for the purposes of preparing the financial statements. The financial report has been presented in Australian dollars. The amendments to AASB 116 prohibit the use of a revenue-based depreciation method for property, plant and equipment. Additionally, the amendments provide guidance in the application of the diminishing balance method for property, plant and equipment. The financial report covers Leigh Creek Energy Limited The amendments to AASB 138 present a rebuttable and its controlled entities as a consolidated entity presumption that a revenue-based amortisation (“Group”). Leigh Creek Energy Limited is a listed public method for intangible assets is inappropriate. This company, incorporated and domiciled in Australia. rebuttable presumption can be overcome (i.e., The consolidated financial statements for the year ended 30 June 2016 were approved and authorised for issue in a revenue-based amortisation method might be appropriate) only in two (2) limited circumstances: accordance with a resolution of the Directors on a. The intangible asset is expressed as a measure 15 August 2016. b) Overall considerations The consolidated financial statements have been prepared on an accruals basis and are based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. c) Basis of consolidation The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June of revenue, for example when the predominant limiting factor inherent in an intangible asset is the achievement of a revenue threshold (for instance, the right to operate a toll road could be based on a fixed total amount of revenue to be generated from cumulative tolls charged); or b. When it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. When these amendments are first adopted for the year ending 30 June 2017, there will be no material impact on the transactions and balances recognised 2016. The Parent controls a subsidiary if it is exposed, or in the financial statements. has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a report date of 30 June. The controlled entities are disclosed in Note 17(a) to the financial statements. All inter-company balances and transactions between entities in the consolidated entity, including any unrealised profits or losses, have been eliminated on consolidation. Amounts reported in the financial ii) AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101. The amendments: - clarify the materiality requirements in AASB 101, including an emphasis on the potentially detrimental effect of obscuring useful information with immaterial information statements of subsidiaries have been adjusted where - clarify that AASB 101’s specified line items necessary to ensure consistency with the accounting in the statement(s) of profit or loss and other policies adopted by the Group. comprehensive income and the statement of financial position can be disaggregated 34 For personal use only N O T E S L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 - add requirements for how an entity should present In July and August 2015, the AASB reissued AASB subtotals in the statement(s) of profit and loss and 8, AASB 133 and most of the Australian Accounting other comprehensive income and the statement of Standards that incorporate IFRSs to make editorial financial position - clarify that entities have flexibility as to the order in which they present the notes, but also emphasise that understandability and comparability should be considered by an entity when deciding that order - remove potentially unhelpful guidance in IAS 1 for identifying a significant accounting policy. changes. The application paragraphs in the previous versions of AASB 8 and AASB 133 covered scope paragraphs that appear separately in the corresponding IFRS 8 and IAS 33. In moving those application paragraphs to AASB 1057 when AASB 8 and AASB 133 were reissued in August, the AASB inadvertently deleted the scope details from AASB 8 and AASB 133. This amending Standard puts When these amendments are first adopted for the the scope details into those Standards, and removes year ending 30 June 2017, there will be no material the related text from AASB 1057. There is no change impact on the financial statements. to the requirements or the applicability of AASB 8 iii) AASB 2015-2 Amendments to Australian Accounting and AASB 133. Standards – Disclosure Initiative: Amendments to When this standard is first adopted for the year ending AASB 101 Presentation of Financial Statements 30 June 2017, there will be no material impact on the The Standard makes amendments arising from the IASB’s Disclosure Initiative project. The amendments: • clarify the materiality requirements in AASB 101, including an emphasis on the potentially detrimental effect of obscuring useful information with immaterial information • clarify that AASB 101’s specified line items in the statement(s) of profit or loss and other comprehensive income and the statement of financial position can be disaggregated • add requirements for how an entity should present transactions and balances recognised in the financial statements. v) AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 This amendment alters AASB 107 Statement of Cash Flows to require entities preparing financial statements in accordance with Tier 1 reporting requirements to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash subtotals in the statement(s) of profit and loss and other comprehensive income and the statement of changes. financial position • clarify that entities have flexibility as to the order in which they present the notes, but also emphasise that understandability and comparability should be considered by an entity when deciding that order • remove potentially unhelpful guidance in AASB 101 for identifying a significant accounting policy When this standard is first adopted for the year ending 30 June 2017, there will be no material impact on the transactions and balances recognised in the financial statements. iv) AASB 2015-9 Amendments to Australian Accounting Standards – Scope and Application Paragraphs When this standard is first adopted for the year ending 30 June 2018, there will be no material impact on the transactions and balances recognised in the financial statements. vi) AASB 9 Financial Instruments (December 2014) AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. The main changes are: a) Financial assets that are debt instruments will be classified based on: i) the objective of the entity’s business model for This amendment inserts scope paragraphs into managing the financial assets; and AASB 8 Operating Segments and AASB 133 Earnings per Share in place of application paragraph text in AASB 1057. ii) the characteristics of the contractual cash flows. 35 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only N O T E S L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 b) Allows an irrevocable election on initial recognition vii) AASB 2014-7 Amendments to Australian Accounting to present gains and losses on investments in Standards arising from AASB 9 (December 2014) equity instruments that are not held for trading in other comprehensive income (instead of in profit or loss). Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument. Incorporates the consequential amendments arising from the issuance of AASB 9 (refer (i) above). When this standard is first adopted for the year ending 30 June 2019, there will be no material impact on the transactions and balances recognised in the financial c) Introduces a ‘fair value through other comprehensive income’ measurement category for statements. viii) AASB 16 Leases particular simple debt instruments. • replaces AASB 117 Leases and some lease- d) Financial assets can be designated and related Interpretations; measured at fair value through profit or loss • requires all leases to be accounted for ‘on-balance at initial recognition if doing so eliminates or sheet’ by lessees, other than short-term and low significantly reduces a measurement or recognition value asset leases; inconsistency that would arise from measuring assets or liabilities, or recognising the gains and losses on them, on different bases. • provides new guidance on the application of the definition of lease and on sale and lease back accounting; e) Where the fair value option is used for financial liabilities the change in fair value is to be accounted • largely retains the existing lessor accounting requirements in AASB 117; and for as follows: - the change attributable to changes in credit risk are presented in Other Comprehensive Income (‘OCI’) • requires new and different disclosures about leases As this Standard will be first adopted for the year ending 30 June 2019, the impact has not yet been - the remaining change is presented in profit determined. or loss If this approach creates or enlarges an accounting mismatch in the profit or loss, the effect of the changes in credit risk are also presented in profit or loss. Otherwise, the following requirements have ix) AASB 15 Revenue from Contracts with Customers • replaces AASB 118 Revenue, AASB 111 Construction Contracts and some revenue-related Interpretations: − establishes a new revenue recognition model generally been carried forward unchanged from − changes the basis for deciding whether AASB 139 into AASB 9: revenue is to be recognised over time or at a - classification and measurement of financial liabilities; and - derecognition requirements for financial assets and liabilities. AASB 9 requirements regarding hedge accounting represent a substantial overhaul of hedge accounting that enable entities to better reflect their risk point in time − provides new and more detailed guidance on specific topics (e.g. multiple element arrangements, variable pricing, rights of return, warranties and licensing) − expands and improves disclosures about revenue management activities in the financial statements. As this Standard will be first adopted for the year Furthermore, AASB 9 introduces a new impairment ending 30 June 2019, the impact has not yet been model based on expected credit losses. This model determined. makes use of more forward-looking information and applies to all financial instruments that are subject to impairment accounting. There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and When this standard is first adopted for the year ending on foreseeable future transactions. 30 June 2019, there will be no material impact on the transactions and balances recognised in the financial 36 statements. For personal use only N O T E S L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 e) Impairment of Assets At each reporting date, the group reviews the carrying values of its assets to determine whether there is any indication that those assets have been impaired. If such The resulting accounting estimates will, by definition, seldom equal the related actual results. The areas involving significant estimates and assumptions are listed below: an indication exists, the recoverable amount of the asset, • Exploration and Evaluation Expenditure – Note 7 being the higher of the asset’s fair value less costs to Judgement is required to ensure that the carrying sell and value in use, is compared to the asset’s carrying value of Exploration and Evaluation assets does not value. Any excess of the asset’s carrying value over its exceed the recoverable amount. Factors considered recoverable amount is expensed to the statement of in this judgement are: profit or loss and other comprehensive income. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. f) Segment reporting The Board has considered the requirements of AASB 8 Operating Segments and the internal reports that are reviewed by the chief operating decision maker (the Board) in allocating resources and has concluded at this time that there are no separately identifiable. g) Goods and Services Tax (GST) a) the period for which the entity has the right to explore in the specific area has expired or will expire in the near future; b) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned; c) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities; d) sufficient data exists to indicate that, although Revenues, expenses and assets are recognised net a development in the specific area is likely to of the amount of GST, unless the GST incurred is not proceed, the carrying amount of the exploration recoverable from the Australian Tax Office. In this case and evaluation asset is unlikely to be recovered it is recognised as part of the cost of acquisition of the in full from successful development or by sale. asset or as part of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. The net amount Management has made a judgement that, given these factors, the balance of Exploration and Evaluation assets is not impaired. of GST recoverable from the Australian Tax Office is • Share based payments – Note 15 included with other receivables in the statement of The valuation for accounting purposes of Share financial position. Cash flows are presented in the cash flow statement on a GST inclusive basis. h) Comparative Figures Based Payments relies on a number of factors that cannot be accurately measured. These include: a) the volatility of the LCK share value; b) the probability that vesting conditions/milestones Unless otherwise required by an accounting standard will be met; comparative information is disclosed in respect of the c) the probability that the employee will remain previous corresponding period, including for narrative employed with the company until the expiry date and descriptive information. To the extent that items of the options; are amended or reclassified comparative amounts are also amended or reclassified. Prior period errors are retrospectively corrected in the next financial report following discovery. d) the probability that the employee will exercise their options. Final judgement about vesting of the options is retained by the Board. Management has assessed each of these factors and made i) Critical Accounting Estimates and Judgments judgements on what factors are used for the The Directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. calculation. 37 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only N O T E S L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 NOTE 2: REVENUE AND EXPENSES FROM OPERATIONS Accounting policy – revenue and expenses recognition i) Interest revenue Interest revenue is recognised on an accrual basis taking into account the interest rates applicable and is recognised at the time the right to receive payment is established. ii) Other expenses Other expenses represents costs incurred for the administration of the business. Costs relating to the project have been capitalised to Exploration and Evaluation expenditure (as shown in Note 7). Consolidated Group a) Revenue Interest revenue Sundry income b. Other expenses Other expenses includes: Accounting and audit Computer costs Insurance Investment writedown Printing & office supplies Communications costs Investor relations Listing & registry fees Sundry c) Transaction costs Details of the reverse acquisition transaction (completed in year ended 30 June 2015) Fair value of consideration transferred Fair value of assets and liabilities assumed Transaction costs in profit or loss NOTE 3: INCOME TAX Accounting policy – income taxes 2016 $ 18,283 20,930 39,213 181,688 65,200 62,418 2,650 29,828 304,966 554,460 93,459 168,792 1,463,461 2015 $ 2,319 - 2,319 32,546 2,658 4,453 1,140 16,241 8,652 - 14,408 5,077 85,175 - - - 18,441,558 (1,715,514) 16,726,044 Deferred taxes are not recognised in the accounts. As the Group has significant carried forward tax losses, it does not have sufficient taxable temporary differences which will result in taxable amounts against which the unused tax losses can be utilised. The amount of benefits which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the condition of deductibility imposed by the law. 38 For personal use only L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 N O T E S NOTE 3: INCOME TAX continues Tax consolidation Leigh Creek Energy Limited and its wholly owned Australian subsidiaries are part of a tax-consolidated group under Australian taxation law. a) Numerical reconciliation of income tax expense to prima facie tax payable Loss before income tax Deemed acquisition cost of subsidiary Loss from continuing operations Prima facie tax (benefit) on loss before income tax at 30% (2015: 30%) Permanent differences: Entertainment non deductible Share based payments Movement in unrecognised tax assets and liabilities Current year tax loss not recognisable Aggregate income tax expense Aggregate income tax expense comprises: Current taxation expense Net deferred tax Consolidated Group 2016 $ 2015 $ (5,366,248) (17,598,147) - 16,726,044 (5,366,248) (1,609,874) 6,060 345,823 (607,015) 1,865,006 - (1,257,992) 1,257,992 - (872,103) (261,631) - - 12,225 249,406 - (261,631) 261,631 - b) Tax losses Unused tax losses for which no deferred tax asset has been recognised Revenue losses Capital losses 14,264,297 34,803 12,399,291 34,803 The Group considers that in the future it will be generating taxable income to utilise carried forward tax losses, however, it does not meet the recognition criteria. Additionally, the carried forward tax losses can only be utilised in the future when taxable income is being generated, if the continuity of ownership test is passed, or failing that, the same business test is passed. NOTE 4: CASH AND CASH EQUIVALENTS Accounting policy – cash and cash equivalents Cash and cash equivalents include cash on hand and deposits held at call with banks. Cash at bank and on hand Term deposit Total Cash and cash equivalents 8,659,369 - 8,659,369 1,433,083 51,544 1,484,627 39 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only N O T E S L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 NOTE 5: TRADE AND OTHER RECEIVABLES Accounting policy – Trade and other receivables Trade receivables are recognised initially at fair value. At balance date, no receivables were considered to be outstanding or impaired. GST recoverable Funds on deposit Prepayments Related company balance R&D tax incentive receivable Other debtors Total Trade and other receivables Consolidated Group 2016 $ 70,870 110,000 87,494 11,667 43,871 14,562 338,464 2015 $ 47,618 50,000 - - - 4,000 101,618 An amount of $11,667 is receivable from Allied Resources Partners, in which Executive Chairman Mr Peters and Managing Director Mr Shearwood have an interest. This is not subject to any terms, conditions or fixed payment dates. NOTE 6: PROPERTY, PLANT AND EQUIPMENT Accounting policy – property, plant and equipment Each class of property, plant and equipment is carried at cost, where applicable, less any accumulated depreciation and impairment losses. i) Plant and equipment Plant and equipment are shown at historical cost less accumulated depreciation and accumulated impairment. Cost includes expenditure that is directly attributable to the acquisition of the assets. The carrying amount of plant and equipment is reviewed annually to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. ii) Depreciation Depreciation is calculated using the straight-line method to allocate their cost over their estimated useful lives, as follows: • Plant and equipment 5-33% • Office equipment 10-50% • Motor vehicles 15% • Leasehold improvement 45% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Gains and losses on disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets (including impairment provision) and are recognised in the profit or loss with Other Income or Other Expenses. 40 For personal use only N O T E S L E I G H C R E E K E N E R GY L I M I T E D A B N 3 1 1 0 7 5 3 1 8 2 2 NOTE 6: PROPERTY, PLANT AND EQUIPMENT continues Cost Balance at 1 July 2015 Additions Disposals Balance at 30 June 2016 Accumulated depreciation & impairment Balance at 1 July 2015 Depreciation Impairment loss Disposals Balance at 30 June 2016 Carrying amounts At 1 July 2015 At 30 June 2016 Consolidated Group 2016 $ 2015 $ 541,943 53,745 (79,993) 515,695 337,585 35,664 99,285 (69,779) 402,755 112,940 816,488 - (274,545) 541,943 521,189 35,547 125,788 (219,151) 463,373 78,570 NOTE 7: EXPLORATION AND EVALUATION EXPENDITURE Accounting policy – exploration and evaluation expenditure Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that right of tenure is current and those costs are expected to be recouped through the successful development of the area (or, alternatively by its sale) or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves and operations in relation to the area are continuing. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. Accumulated costs, in relation to an abandoned area, are written off in full against profit in the period in which the decision to abandon the area is made. Balance at opening Project development & exploration costs Total exploration and evaluation expenditure 710,667 1,739,813 2,450,480 - 710,667 710,667 During the year the Company applied for R&D Tax Incentives through AusIndustry in relation to eligible research expenditure incurred during 2015 for the Leigh Creek Energy Project. The tax incentive is provided as a refundable tax credit and has been credited to Exploration and Evaluation capitalised expenditure. 41 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only N O T E S NOTE 7: EXPLORATION AND EVALUATION EXPENDITURE continues The Company’s interests in tenements at the date of this report are as follows: Tenement PEL 650 PELA 582 PELA 643 PELA 647 PELA 644 PELA 649 EL 5596 EL 5597 GSEL 662 Location Leigh Creek Finniss Springs Callabonna Leigh Creek Roxby Downs Oakdale Leigh Creek Leigh Creek Leigh Creek Interest 100% 100% 100% 100% 100% 100% 100% 100% 100% NOTE 8: TRADE AND OTHER PAYABLES Trade and other payables consist of the following: Trade payables Other payables Accruals Total Trade and other payables NOTE 9: SHORT TERM LOANS All Short Term Loans were repaid during the financial year: Related Company balance Shareholder Loan Directors loan Total short term loans Consolidated Group 2016 $ 295,089 246,641 123,981 665,711 - - - - 2015 $ 68,269 174,001 116,000 358,270 16,004 102,500 6,934 125,438 The repayment of the loans was not subject to any terms, conditions or interest charges. NOTE 10: EMPLOYEE BENEFITS Accounting policy – Employee benefits Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to reporting date. These benefits include wages, salaries and annual leave. Where these benefits are expected to be settled within 12 months of the reporting date, they are measured at the amounts expected to be paid when the liabilities are settled. The provision has been recognised at the undiscounted amount expected to be paid. 42 For personal use only N O T E S NOTE 10: EMPLOYEE BENEFITS continues In relation to employee benefits arising for employees directly involved in the exploration project, these indirect costs have been capitalised to the project. Liability for annual leave Total employee benefit liability NOTE 11: ISSUED CAPITAL Accounting policy – Share capital Consolidated Group 2016 $ 124,519 124,519 2015 $ 20,803 20,803 Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares is shown in equity as a deduction from the proceeds. The company has granted unlisted options to employees in respect of their employment contracts. The fair value of the options granted is recognised as an employee benefits expense with a corresponding increase in equity (Share Option Reserve). The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to exercise the option. Fair value is determined by the use of a Trinomial option pricing model. On 9 May 2016, the Company announced that a capital raising had been completed by a private placement of 35,374,969 new fully paid ordinary shares. The capital raising costs were $1,159,446. Deemed to be outstanding at beginning of period 215,519,472 19,493,353 Number $ Treasury stock sold Capital raising (net of costs) Balance outstanding at the end of the period a) Ordinary shares 15,000,000 35,374,969 3,426,321 9,442,046 265,894,441 32,361,720 Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At the shareholders’ meeting each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. All unissued shares are ordinary shares of the Company. b) Treasury stock On 29 June 2015, ARP TriEnergy Pty Ltd (formerly a shareholder of Leigh Creek Energy Ltd), acquired Leigh Creek Energy Limited by way of a reverse acquisition. Treasury stock represents the number of shares held by ARP TriEnergy prior to the reverse acquisition: Balance at 1 July 2015 Sold during the financial year Balance at 30 June 2016 Number 15,000,000 Shares (15,000,000) Shares - Shares 43 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only N O T E S NOTE 11: ISSUED CAPITAL continues c) Unlisted Options A number of unlisted options were issued during the financial year. At the date of this report, unissued shares of the Group under option are: Expiry date Exercise price Number of shares 14 October 2019 $0.212 14 October 2020 31 July 2020 30 November 2020 31 October 2018 31 October 2018 31 October 2018 31 October 2018 $0.25 $1.50 $0.30 $0.20 $0.22 $0.24 $0.26 1,000,000 1,000,000 2,000,000 10,250,000 1,500,000 1,500,000 1,500,000 1,500,000 20,250,000 For options granted to employees, options will expire on the earlier of the expiry date or termination of the employee’s employment (unless the employee is a retiring director). In addition, the ability to exercise the options is conditional on the Group achieving a number of operational and financial milestones. Some options were issued in relation to services provided for the capital raising completed in May 2016. The expiry date is shown in the table above. d) Listed Options A number of listed options were issued as part of the prospectus for the capital raising finalised in May 2016. At the date of this report, unissued shares of the Group under option are: Expiry date Exercise price Number of shares 6 June 2018 $0.50 17,687,463 All options expire on the expiry date. There are no vesting conditions. e) Capital Management Management objectives when managing capital are to ensure that the Group can fund the development of its operations. The Group manages the capital structure and makes adjustments to it in light of the forecast cash requirements of the development programme. To that end, internal capital rationing is complemented by capital raising activities as required to ensure funding for development activities is in place. There are no externally imposed capital requirements. 44 For personal use only N O T E S NOTE 12: RESERVES Accounting policy - Reserves The share option reserve is used to recognise the fair value of options granted to employees and consultants but not exercised. Upon exercise of the options, the proceeds are allocated to share capital. Share option reserve A breakdown of the share option reserve is as follows 1: Directors 2 Employees Consultants 3 Consolidated Group 2016 $ 1,395,284 1,395,284 No of Options 8,000,000 10,250,000 8,300,000 26,550,000 2015 $ - - 2016 $ 487,913 218,453 688,918 1,395,284 1 See also Note 15 Share Based Payment Plans for factors considered in the fair value calculation. 2 Expense relating to options granted for Directors also includes options for GD English and M Chatfield which AGM approval is required. 3 Options granted to Consultants relate to Investor Relations and Capital Raising consultancy services. NOTE 13: COMMITMENTS FOR EXPENDITURE a) Accounting policy - operating leases Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. The Company does not have any leases over property, plant or equipment where lease arrangements would be classed as finance leases. Operating lease commitment Not longer than 1 year Longer than 1 year and not longer than 5 years 2016 $ 163,577 27,773 The operating lease commitments shown above also include the commitment to annual payments for tenement leases with the South Australian state government. The Group has no contingent liabilities at the year end. b) Accounting policy – capital commitments Capital commitments relates to expenditure commitments for the Leigh Creek Energy Project (LCEP) outstanding at balance date. Leigh Creek Energy Project 790,356 2015 $ 5,000 - - Additionally, under the terms of tenement registration and renewal, some tenements have commitments to work requirements or minimum expenditure. The commitment to work requirements at Leigh Creek is included above. In relation to minimum expendi- ture requirements for two tenements, these are currently being negotiated and therefore, are not disclosed above. There are no other commitments at balance date for expenditure by the Group. 45 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only N O T E S NOTE 14: FINANCIAL INSTRUMENTS Accounting policy – Financial instruments Recognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument, and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss, which are measured initially at fair value. Subsequent measurement of financial assets and financial liabilities are described below. Classification and subsequent measurement i) Financial assets at fair value through profit and loss (FVTPL) Financial assets at FVTPL include financial assets that are either classified as held for trading or that meet certain conditions and are designated at FVTPL upon initial recognition. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions. ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost. Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in the profit or loss. Impairment At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the profit or loss. a) Financial Risk Management The Group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivables and payable which are summarised as follows: Floating interest at call Non-interest bearing Within 1 year Within 1 year > 1 year Total 2016 2015 $ $ 2016 $ 2015 $ 2016 $ 2015 $ 2016 $ 2015 $ $Financial Assets - Cash and cash equivalents 8,659 1,445 - Receivables Financial assets at fair value through profit & loss - - - - Total Financial Assets 8,659 1,445 Financial Liabilities Trade and other payables Total Financial Liabilities - - - - 12 - 16 28 542 542 40 102 19 161 242 242 - - - - - - - - - - - - 8,671 1,485 - 16 102 19 8,687 1,606 542 542 242 242 46 For personal use only N O T E S NOTE 14: FINANCIAL INSTRUMENTS continues The group does not hold any derivative instruments. i) Treasury Risk Management The risk management of treasury functions is managed by the Board. No efficiencies or other benefits would be gained by having a separate finance committee. ii) Finance Risks The Group’s financial instruments are exposed to a variety of financial risks, being Market risk (Interest rate and Price risk), Credit risk and Liquidity risk. The Group operates mainly in Australia and as such is not subject to foreign exchange risk. Interest rate risk The Group’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates on classes of financial assets and liabilities, is summarised in the table above. As the Group does not have any bank borrowings the interest rate risk is considered to be minimal. Sensitivity: At June 30, 2016, if interest rates had changed by -/+ 10 basis points from the year end rates with all other variables held constant post tax loss and total equity would have been $754 more/less as a result of lower/ higher interest income from term deposits. Price risk Price risk relates to the risk that the fair value of a financial instrument will fluctuate because of changes in market prices largely due to market forces. The Group’s available-for-sale financial assets and fair value through profit and loss financial assets are subject to price risk. Investments within these two categories of financial assets are publicly traded on the ASX. Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligation that could lead to a financial loss to the Group. The Group’s maximum exposure to credit risk is its cash and cash equivalents and receivables as noted in the table above. The group manages its credit risk by depositing with reputable licenced banks. Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate sources of funding are available. Maturity of the group’s financial liabilities is within 1 year. NOTE 15: SHARE BASED PAYMENT PLANS Accounting policy – share based payment plans Share based compensation benefits are provided to employees of the Company. The fair value of the options granted under the plan is recognised as an employee benefit expense with a corresponding increase in equity (Share Option Reserve). The fair value is measured at grant date and recognised over the period during which the employees become entitled to the underlying shares. The fair value at issue date is calculated using the Trinomial option pricing model that takes into account the share price at issue date, the exercise price, the term until expiry, estimate of implied volatility, the vesting and performance criteria and the non-tradeable nature of the option. At each balance sheet date, the Company revises its estimate of the number of options that are expected to become exercisable. 47 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only N O T E S NOTE 15: SHARE BASED PAYMENT PLANS continues a) Number of options issued to employees during the year Outstanding at beginning of the year Forfeited Issued Exercised Consolidated Group 2016 $ 750,000 (750,000) 14,250,000 - 2015 $ 750,000 - - - 14,250,000 750,000 b) Valuation assumptions Plan 1 Plan 2 Plan 3 Grant date Number issued Share price at grant date Volatility (average)5 Fair value at issue date Exercise price Exercisable from Exercisable to Notes: 15 October 2015 1 December 2015 1 December 2015 2,000,000 2,000,000 10,250,000 $0.17 70% $0.08 $0.212 1 , $0.25 2 $0.23 70% $0.02 $1.50 $0.23 70% $0.04 $0.30 22 October 2015 31 July 2016 3 31 July 2016 3 14 October 2020 4 31 July 2020 30 November 2020 1 Exercise price for Tranche 1 was the greater of $0.20 and 10% premium to the 5 day VWAP up to 26 May 2015. 2 Exercise price for Tranche 2 was the greater of $0.25 and 20% premium to the 5 day VWAP up to 26 May 2015. 3 Options vest at 25% per year on 31 July 2016, 31 July 2017, 31 July 2018 and 31 July 2019 if vesting conditions (milestones) are achieved. 4 Tranche 1 expiry date is 14 October 2019, and Tranche 2 expiry date is 14 October 2020. 5 A volatility curve was used for calculations. NOTE 16: NOTES TO THE STATEMENT OF CASH FLOWS a) Reconciliation of cash For the purposes of the statement of cash flows, cash includes cash on hand and in banks and investments in money market instruments. Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: Cash on hand 8,659,369 10,069 Accounting subsidiary cash acquired upon completion under reverse takeover principles Cash and cash equivalents - 8,659,369 1,474,558 1,484,627 The weighted average effective interest rate on bank deposits is 1.13% (2015: 2.55%). All deposits are for less than 12 months. 48 For personal use only N O T E S NOTE 16: NOTES TO THE STATEMENT OF CASH FLOWS continues b) Reconciliation of Cash Flow from Operations with Loss after Taxi) Treasury Risk Management Consolidated Group 2016 $ 2015 $ Loss after income tax (5,366,248) (17,598,147) Cash flows excluded from loss attributable to operating activities: Non cash transaction costs for the acquisition of subsidiary company pursuant to reverse acquisition Non-cash flows in operating loss Gain disposal shares Depreciation expense Share based payments Change in assets and liabilities Decrease/(Increase) in receivables / prepayments Increase/(Decrease) in payables Increase/(Decrease) in provisions - 16,726,044 - 35,664 1,152,745 (236,846) 307,441 103,716 (78,384) 35,547 - (68,280) 78,129 - Net Cash (used in) / provided by operating activities (4,003,528) (905,091) NOTE 17: PARENT ENTITY DISCLOSURES a) Investment in controlled entities Entity Country of incorporation Class of share Bonanza Gold Pty Ltd ARP TriEnergy Pty Ltd Australia Australia Ordinary Ordinary b) Parent entity information Parent Entity Asset Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Share option reserve Retained earnings Shareholder equity Financial performance Profit (loss) for the year Other comprehensive income Total comprehensive income Interest Held 2016 100% 100% 2015 100% 100% 8,936,167 1,868,783 10,804,950 790,230 - 790,230 1,901,276 78,570 1,979,846 264,332 - 264,332 56,000,502 1,557,434 (47,543,216) 44,033,982 162,150 (42,480,618) 10,014,720 1,715,514 (5,366,248) - (2,000,519) 403,451 (5,366,248) (1,597,068) The parent entity has capital commitments of $0.8m at balance date for further expenditure at the Leigh Creek project. Refer to Note 13 for further details of the commitment. The parent entity has not entered into a deed of cross guarantee nor are there any contingent liabilities at the year end. 49 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only N O T E S NOTE 18: RELATED PARTY TRANSACTIONS a) Key management personnel compensation Total short term employee benefits Total post-employment benefits Share based payments Total Remuneration Consolidated Group 2016 $ 1,435,513 133,226 617,554 2,186,293 2015 $ 435,453 69,005 13,874 518,332 b) Other transactions with key management personnel Transactions between related parties are on normal commercial terms and conditions no more favourable than those to other parties, unless otherwise stated. An amount of $11,667 is receivable from Allied Resources Partners, in which Executive Chairman Mr Peters and Managing Director Mr Shearwood have an interest. This is not subject to any terms, conditions or fixed payment dates. NOTE 19: AUDITOR’S REMUNERATION During the year the following fees were paid or payable for services provided by the Auditor of the Group: Auditing & review services Other services NOTE 20: EARNINGS PER SHARE Accounting policy – Earnings per share 42,830 - 30,000 - i) Basic earnings per share Basic earnings per share is calculated by dividing the profit (loss) attributable to equity holders excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year. ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the weighted average number of shares assuming conversion of all dilutive potential ordinary shares Loss used to calculate basic EPS (5,366,248) (17,598,147) Basic earnings per share – cents per share Diluted earnings per share – cents per share Weighted average number of shares used as denominator Weighted average number of ordinary shares outstanding (0.02) (0.02) (0.13) (0.13) during the year used in calculating basic EPS 228,247,299 138,331,683 Shares deemed to be issued for no consideration in respect of share based payments Listed options issued for no consideration 20,250,000 17,687,463 750,000 - Weighted average number of shares used in diluted earnings per share 266,184,762 139,061,683 50 For personal use only N O T E S NOTE 21: MATTERS SUBSEQUENT TO THE END OF THE YEAR Unlisted options were issued on 20 July 2016 relating to capital raising services provided in May 2016 in accordance with ASX announcement on 9 May 2016. The cost of these options were expensed in the financial year ending 30 June 2016. NOTE 22: COMPANY DETAILS The registered office and principal place of business is: Leigh Creek Energy Limited Level 11, 19 Grenfell Street Adelaide, South Australia 5000 51 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only I N D E P E N D E N T A U D I T R E P O R T      Level 1, 67 Greenhill Rd Wayville SA 5034 Correspondence to: GPO Box 1270 Adelaide SA 5001 T 61 8 8372 6666 F 61 8 8372 6677 E info.sa@au.gt.com W www.grantthornton.com.au            INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF LEIGH CREEK ENERGY LIMITED    Report on the financial report We have audited the accompanying financial report of Leigh Creek Energy Limited (the “Company”), which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year.            Directors’ responsibility for the financial report The Directors of the Company are responsible for the preparation of the financial report that   gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001. The Directors’ responsibility also includes such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, the financial statements comply with International Financial Reporting Standards.              Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context  requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal  entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s  acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities.  GTIL is not an Australian related entity to Grant Thornton Australia Limited.   Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme   applies.    52 For personal use only I N D E P E N D E N T A U D I T R E P O R T 2 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: a the financial report of Leigh Creek Energy Limited is in accordance with the Corporations Act 2001, including: i ii giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001; and b the financial report also complies with International Financial Reporting Standards as disclosed in the notes to the financial statements. 53 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only I N D E P E N D E N T A U D I T R E P O R T 3 Report on the remuneration report We have audited the remuneration report included in pages 21 to 25 of the directors’ report for the year ended 30 June 2016. The Directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion on the remuneration report In our opinion, the remuneration report of Leigh Creek Energy Limited for the year ended 30 June 2016, complies with section 300A of the Corporations Act 2001. GRANT THORNTON AUDIT PTY LTD Chartered Accountants I S Kemp Partner – Audit & Assurance Adelaide, 15 August 2016 54 For personal use only I N D E P E N D E N T A U D I T R E P O R T S H A R E H O L D E R I N F O R M AT I O N At the date of this report all the issued securities of the Company comprised ordinary shares, 104,767,190 of which are escrowed for 2 years from July 3, 2015, otherwise not subject to any restrictions. SUBSTANTIAL SHAREHOLDERS AT 8 AUGUST 2016 Name Fully Paid Shares Ordinary Shares % Options Options % Allied Resource Partners Pty Ltd 104,767,190 CITIC Australia Pty Ltd 17,242,855 39.40 6.48 - - - - DISTRIBUTION OF SHAREHOLDINGS AT 8 AUGUST 2016 The issued capital of the Company is fully paid ordinary shares (entitling the holders to participate in dividends and proceeds on winding up of the Company in proportion to the number of shares held) and listed options. On a show of hands every holder of the shares present at a meeting in person or by proxy is entitled to one vote and upon a poll each share counts as one vote. Holders of listed options do not have any entitlements to vote or receive dividends. Range 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over TOTAL Total Holders Shares 458 658 320 688 230 2,354 Number of Shares 241,645 1,732,014 2,545,998 26,941,722 234,433,062 265,894,441 Total Holders Listed Options Number Of Listed Options 0 1 11 96 23 131 0 3,333 93,331 4,116,640 13,474,159 17,687,463 At 8 August 2016 a marketable parcel constituted 2,778 shares. The number of shareholders holding less than a marketable parcel was 870 (995,392 shares). TWENTY LARGEST SHAREHOLDERS AT 8 AUGUST 2016 Name Fully Paid % of Issued Ordinary Shares Capital Allied Resource Partners Pty Ltd 104,767,190 39.40 Citic Australia Pty Ltd Mr Richard McGrath RBC Investor Services Australia Nominees Pty Ltd (BKCust A/C) One Design & Skiff Sails Pty Ltd (I W Brown Super Fund A/C) HSBC Custody Nominees (Australia) Limited UBS Nominees Pty Ltd JP Morgan Nominees Australia Limited Mr Nicholas James Redpath Mr John Brown + Ms Elisabeth Frederico (Joli S/F A/C) FMS Pty Ltd (SM Appleyard S/F A/C) National Nominees Limited (DB A/C) Bart Properties Pty Ltd (Scott Flynn Family A/C) James St Equities Pty Ltd Telemark International Pty Ltd Lawry Super Nominees Pty Ltd (Lawry Family Super Fund A/C) Citicorp Nominees Pty Ltd Mr George Hioureas Ms Nichola Marguerite Clutterbuck LP Rayner Nominees Pty Ltd Totals Top 20 Total Remaining Holders Balance 17,242,855 10,557,449 6,700,000 5,167,137 4,621,594 4,499,773 4,104,348 2,528,999 2,020,001 1,711,379 1,666,930 1,666,666 1,577,458 1,424,454 1,413,647 1,342,404 1,070,000 1,029,666 1,020,000 6.48 3.97 2.52 1.94 1.74 1.69 1.54 0.95 0.76 0.64 0.63 0.63 0.59 0.54 0.53 0.50 0.40 0.39 0.38 176,131,950 89,762,491 66.22 33.78 55 LEIGH CREEK ENERGY LIMITED ANNUAL REPORT 2016For personal use only S H A R E H O L D E R I N F O R M AT I O N TWENTY LARGEST LISTED OPTION HOLDERS AT 8 AUGUST 2016 Name Listed Options % of Options RBC Investor Services Australia Nominees Pty Ltd (BKCust A/C) UBS Nominees Pty Ltd JP Morgan Nominees Australia Limited Bart Properties Pty Ltd (Scott Flynn Family A/C) BNP Paribas Nominees Pty Ltd (Global Prime Omni DRP) National Nominees Limited (DB A/C) Point One Capital Pty Ltd BNP Paribas Nominees Pty Ltd (DRP) Citicorp Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited – A/C 3 Merrill Lynch (Australia) Nominees Pty Limited Equipment Company of Australia Pty Limited Mr Richard Crawford Grooms Mr Jan-Per Hole ARK Equities Pty Limited Mr Christopher Bayliss + Mrs Lynda Bayliss (Bayliss Super Fund A/C) Jennifer Arnold Pty Limited (The Arnold Super Fund A/C) Linor Pty Ltd (PE Giblin P/L SBF A/C) Purflem Super Pty Ltd (Flemming Promotions S/F A/C) David John Iron (Iron Filings Retirement A/C) Totals Top 20 Total Remaining Holders Balance UNISSUED EQUITY SECURITIES Unlisted options Listed options SECURITIES EXCHANGE The Company is listed on the Australian Securities Exchange. 3,350,000 1,915,000 1,666,666 833,333 833,333 833,333 530,000 367,500 333,333 333,333 333,333 291,666 250,000 221,666 200,000 166,666 166,666 166,666 166,666 150,000 18.94 10.83 9.42 4.71 4.71 4.71 3.00 2.08 1.88 1.88 1.88 1.65 1.41 1.25 1.13 0.94 0.94 0.94 0.94 0.85 13,109,160 4,578,303 74.09 25.91 Number 20,250,000 17,687,463 56 For personal use only C O R P O R AT E D I R E C T O R Y Directors Daniel Justyn Peters Executive Chairman David Shearwood Managing Director Greg English Non-Executive Director Murray Chatfield Non-Executive Director Company Secretary Jordan Mehrtens Leigh Creek Energy Ltd ABN 31 107 531 822 PO Box 12 Rundle Mall, Adelaide South Australia, 5000 Australia Phone +61 (8) 8132 9100 Facsimile +61 (8) 8231 7574 contactus@lcke.com.au www.lcke.com.au Registered & Principal Business Office Level 11, 19 Grenfell Street Adelaide, South Australia 5000 Share Registry Computershare Registry Services Pty Ltd Level 5,115 Grenfell Street Adelaide, South Australia, 5000 Investor enquiries: 1300 556 161 International: +61 3 9415 4000 Auditors Grant Thornton Audit Pty Ltd Level 1, 67 Greenhill Road Wayville SA 5034 Principal Lawyers Piper Alderman Level 16, 70 Franklin Street Adelaide, South Australia, 5000 Bankers Commonwealth Bank of Australia 96 King William Street Adelaide, South Australia 5000 ASX Code LCK 57 For personal use only 58 For personal use only

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